Vernon Cass, chief financial officer of Tingley Corporation, a publicly owned enterprise, asked his subordinate, John Conroy, CPA and controller of Tingley, if any accounting changes might be made before the forthcoming close of the fiscal year to enhance Tingley’s earnings for the year. Conroy suggested that he might extend economic lives of plant assets, reduce the percentage used to estimate doubtful accounts expense based on net credit sales, and defer, rather than expense, certain advertising costs that consistently had been recognized as expenses in prior years. Cass instructed Conroy to formalize a proposal incorporating those suggestions, for consideration by the audit committee of Tingley’s board of directors.

Instructions

Evaluate the actions of Vernon Cass and John Conroy. (Suggestion: Consider the provisions of APB Opinion No. 20, “Accounting Changes,” and Statement on Auditing Standards No. 57, “Auditing Accounting Estimates,” in your discussion.)