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.

---

Definitions:

Bond Liability

The commitment to repay the principal amount of a bond along with interest, as per the terms agreed upon with bondholders.

Straight-Line Method

A method of calculating depreciation and amortization that evenly distributes the cost of an asset over its useful life.

Market Rate

Market Rate is the prevailing interest rate available in the marketplace on loans, savings, or investments.

Coupon Rate

The annual interest rate paid by a bond's issuer to the bond's holders, usually expressed as a percentage of the bond's face value.