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Exercise 9-10 [Financial/Theory] Your boss, John Creedy, is a partner in the small local CPA firm for which you work. One morning a client, Jeff Altman, the owner of Alt- man Manufacturing, storms into Mr. Creedy's office and delivers a complaint. An edited version follows: This morning at my breakfast Club I spoke with my competitor, Tony Dodd. He uses the LIFO inventory method just as I do. He boasted that his accountant had told him that by speeding up his purchases of raw materials at year-end he could significantly increase reported profits. If he can do that, why can't 1? And why haven't you discussed this gim- mick with me? I don't expect to rely on Dodd for financial advice; I pay you for that. After Altman's departure, Mr. Creedy calls you, the accountant-in- charge of the Altman account, into his office to discuss Mr. Altman's complaint. You explain to your boss that your concern is your client's very large raw material inventory and slow turnover rate caused by years of over-buying. Mr. Creedy advises you that Altman needs new capital in his business and is trying to interest another local businessper- son in becoming a limited partner. An increase in reported profits could be advantageous to Mr. Altman's plans and, therefore, left to his own devices, Mr. Altman would likely follow Mr. Dodd's accountant's advice. Mr. Creedy asks you to draft a letter to Mr. Altman. The letter should discuss the problems of maintaining an overly large inven- tory as well as the disadvantage of a low tumover rate. Although you are not familiar with Mr. Dodd's company, you are reasonably cer- tain his accountant would not have made the comment he did if Mr. Dodd's company had the same existing inventory problems as Alt- man Manufacturing. Use the proper format, effective organization, and

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