Many Professions Have Adopted a Series of Ethical Standards to Provide

question 28

Essay

Many professions have adopted a series of ethical standards to provide guidance for their memberships. The Society of Management Accountants (CMA), for example, has published standards that focus on competence, confidentiality, integrity, and credibility. In light of these standards, consider the three cases that follow:
Case A-Leston Corporation has experienced serious financial difficulties in recent years. John Young, the company's chief financial officer, has just learned that a major competitor was likely to file for bankruptcy; however, he failed to disclose this information at a board meeting held later that day when a plant closure decision was being discussed. The board evaluated several proposals during the session that focused on improving Leston's financial position.
Case B-QBX Company manufactures fertilizer from various raw materials, including a raw material know as Felstar. Paul Kelly, the firm's purchasing manager, purposely acquired a lower grade of Felstar than normal because of a very attractive price. The lower-grade product resulted in increased usage during the manufacturing process but had no effect on the fertilizer's overall quality. An end-of-period report showed that QBX profited from Kelly's actions, with the overall savings in purchase price more than offsetting the cost of added consumption.
Case C-Central Distributing has a participative budgeting process, allowing employees to have a say in projected sales targets for the upcoming period. These targets are reflected in a series of performance reports that compare actual sales achieved against targeted amounts. Hillary Baxter submitted very low sales targets because, as she confided in a colleague, "I always want to look good in terms of meeting targets, even if anticipated sales and closures don't materialize."
Required:
Evaluate the three cases and determine the ethical issues, if any, that are involved. Cite the CMA's standards if appropriate.

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Definitions:

Illiquid Assets

Assets that cannot be easily sold or converted into cash without a significant loss in value.

Financial Institutions

Organizations that provide financial services, such as banks, insurance companies, and investment funds, playing a critical role in the economy.

Legal Reserve Requirements

Guidelines enforced by central banks on the minimal reserves that banks should maintain in relation to their deposits.

Destroyed Money

The process of physically eliminating money from circulation, typically by central banks, to manage a currency's supply.