Essay
A CPA provides professional services to several businesses in its community.One such client is Primetime Bank,the largest bank in town,and another client is Aeropenetics,Inc.,a large aerospace manufacturer.Aeropenetics,Inc.has a large outstanding loan balance owed to Primetime Bank,and it lately has been experiencing severe liquidity problems.Aeropenetics is a privately-held company and its liquidity problems are not generally known to the public or to Primetime Bank.
In preparing the Allowance for Uncollectible Loans account for Primetime Bank,the CPA must decide whether or not to take into account Aeropenetics' liquidity problems.It learned of these liquidity problems during the course of preparing cash flow budgets for Aeropenetics.
a. What ethical principles are relevant to the CPA's decision?
b. What court cases are relevant to the CPA's decision?
c. What decision should the CPA reach?
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