Ethics Project

Loren is a cost accountant at a large manufacturing company. She has been asked by her manager to update the cost for the company’s lowest selling product, which is made at the plant where Loren works. He wants Loren to complete the task in one day, and does not want Loren to collect much information, because he does not anyone to know what Loren is doing. Loren believes the President of the company will use her numbers to justify closing the plant, which will cause Loren and some of her closest colleagues to lose their jobs. Loren is worried that she cannot provide accurate numbers in such a short time with such limited resources, but her manager is putting a lot of pressure on her to complete the work quickly. Loren is so frustrated with the request that her boss has made that she complains to her co-worker, Charlie, about the situation. Charlie advises Loren to report the cost of the product lower than it actually is so the plant will not be closed. He goes on to explain that if her boss finds out the cost is not accurate that she can blame the inaccuracy on the short time and limited resources that she was given to complete the task.

In an essay of at least five paragraphs (support to position, evidence and example), answer the following questions:
Is Charlie’s advice a violation of the IMA Standards of Ethics? Did Loren violate any of those standards herself? What should Loren do

Ethics Project

Is Charlie’s advice a violation of the IMA Standards of Ethics?

Charlie’s advice is a violation of IMA Standards of Ethics specifically the sections that address Integrity and Credibility (IMA, 2017). On Integrity the IMA standards expect professional accountants to uphold various principles in their work. First, it expects its members to lessen conflicts of interest through various methods such as maintaining open communication channels with associates to identify, advise and avoid potential conflicts of interest. Second, it expects members to avoid participating in any activities that would prevent conducting affairs in an ethical manner. Third, it also expects members to strictly avoid any activity that would bring the profession into disrepute. Finally, it expects members to foster a positive ethical atmosphere and elevate the profession above personal interests. On credibility the IMA standards expect professional accountants to uphold various principles in their work. These include fair communication; transparency in shared information to enable stakeholders make informed decisions; transparency in delays and deficiencies expected in shared information and acknowledgement of limitations in information. Charlie violates integrity standards by asking Loren to give false information to her manager. This action could heighten conflict in the organization, open the door for several unethical activities and bring the profession into disrepute. Furthermore, Charlie’s advice also violates credibility standards by asking Loren to breach communication quality values.  Charlie’s suggestions involve breaching transparency to influence decisions and create false explanations for delays and limitations in the expected communication.

Did Loren violate any of those standards herself?

Loren violates the confidentiality standards in various ways. First, she shares privileged information without authorization or when it is not a legal requirement.  According to the standards the only way Loren can share the information is if her manager, his superiors or the law permits or compels her to do so, hence the conversation with Charlie violates the principles. Second, she does not inform all the relevant stakeholders of her decision to share sensitive information. The standards compel her to inform her manager and any other possible stakeholder before she engages in the conversation with Charlie or anyone else. Third, she intends to use the information to get advice that can help her and her colleagues retain their jobs, which may be unethical or illegal if it is at the expense of the shareholders. Loren’s action is steeped in vested interest because she wants to protect her job. Loren therefore brings herself and the profession into disrepute by sharing information that she is not expected to divulge under any circumstances.

 What should Loren do?

The IMA provides individuals like Loren who face work based dilemmas with various courses of action. First, she could present her concerns about her manager’s unethical behavior to the next level of management or his boss. It may be that the manager is involved in malfeasance individually and is abusing his power without the knowledge of the rest of the organization. Second, she could call the IMA anonymous helpline and seek advice on how to navigate the situation without endangering her job, the company or the manager. Third, she can consult her own lawyer who will guide her on the best course of action, her legal responsibilities, the risks involved and her rights. Fourth, Loren could choose to resign from the organization if her efforts to handle the situation are proving futile. This will ensure she safeguards her integrity without committing actions that will result in earning disrepute.

References

IMA. (2017). Institute of Management Accountants Statement of Ethical Professional Practice (pp. 1–4).