Ethical Dilemma: The Forecast Adjustment
You’re a CPA working as a financial controller for a mid-sized private company, BEBOP Lighting, that’s trying to secure a large loan to fund an environmentally sustainable product line. The company’s mission and values align with long-term public benefit, and you genuinely believe in the project’s potential to do good.
The bank reviewing the loan application requests financial forecasts. The CEO, optimistic about a recent uptick in interest from customers, asks you to “slightly adjust” the revenue growth projections upward to reflect what he believes is a conservative—but more compelling—estimate of the company’s future.
The requested adjustment doesn’t require falsifying any documents or fabricating data—it simply involves choosing a more favorable growth assumption within a justifiable range of possibilities. No laws are broken, and technically, GAAP allows for management judgment in forecasting. You are confident that the company can likely meet or exceed these projections if current trends continue, though it’s not guaranteed.
You feel torn:
Strictly adhering to the most conservative estimate might result in the loan being denied, halting a socially beneficial initiative and possibly leading to layoffs.
Adjusting the forecast as requested could help secure the loan and bring about significant positive outcomes—but it could be seen as compromising objectivity.