Section 1. There are basically two choices that Chris has. The first is that Chris can increase the allowance for bad debts to account for the possibility that Ender will not be able to pay its obligations. The second choice is that Chris can choose not to make any adjustments for this possibility. The receivable is material, so there are going to be meaningful consequences to the construction company if Ender is unable to pay this debt. Chris has an obligation to ensure that the financial statements for the construction company accurately reflect its financial condition. However, there is the mitigating factor that Chris does not actually have factual evidence of Ender's financial condition, just hearsay ("word on the street"). There are a number of different stakeholders here. The first is Chris; the second is Laurent. They are stakeholders on a person al level, having discussed this situation. The construction…show more content… The problem here is that the likelihood of deception being detected are high. The consequences of detection are steep, and would be far more damaging to the company than the consequences of adjusting the allowance to reflect Ender's current credit situation. If Chris wants to maximize the value of the firm, he needs to follow GAAP and leave it to Lauren to do her job and get that credit regardless. Companies that commit accounting fraud and are caught tend to have a much higher failure rate than those that do not commit accounting fraud. And this is taking Friedman's view at face value – in truth many strong arguments have been made against his position, including Mackey's argument that other stakeholders are critical to the success of the business, and their interests need to be met as well as those of the investors, who would without the other stakeholders have nothing but a shell in which to invest (Mackey,