Question

Ollivander’s Wand Shop rents retail space from the owners of Diagon Alley. The owners charge Ollivander a base rental fee of $1,000 a month, plus 2.5% of profits over $1,000,000. J.K. Rowling, the owner of Ollivander’s Wand Shop, directs you, her accountant, to increase the estimate of bad debt expense and to accelerate depreciation charges in order to inflate current period expenses and keep profits below $1,000,000.

Do you comply with your boss’s directive? Is this directive ethical? Who is harmed if the expenses are increased?

Answer 1

No , Accountant should not agree for Boss's Directive

Directive is Unethical

Directly it will effect the owner of Diagon Alley because in agreement it is mentioned that Base rental fee is $1000 and it is fixed , Plus 2.5% of profits over $1,000,000. So for avoiding this 2.5% variable rent boss has decided to inflate expenses and show profits below $1,000,000. Therefore it will directly affect revenue of owners of Diagon Alley and it will also effect financial statements - uderreporting of income which may lead to severe consequences even for Boss .