Question

Assignment 2: Code of Conduct and Ethics-Essay

Introduction: All managers need to be aware of how to address ethical dilemmas that they will encounter in their professional lives.

The following course outcome is assessed in this Assignment:

GEL-7.02: Apply ethical reasoning to ethical issues within the field of study.

Read the scenario and then follow these steps to complete Assignment 2.

First: Research the Accounting Code of Conduct requirements on the internet following the Institute of Management Accountants (IMA) guidelines. Make sure to cite at least one source from those provided and reference them (in your separate reference page).

Second: Note how IMA code of conduct requirements of (1) competence, (2) confidentiality, (3) integrity, and (4) credibility are applicable to this scenario.

Third: Then review the Ethical Approaches tutorial located in the “ethical approaches” presentation provided.

Fourth: Address the following checklist questions in a 2–3 page APA formatted original essay with an additional title and reference page to the Dropbox.

Scenario:

Read the textbook scenario (Ethics Case, p. 18-48) and address the checklist questions located below:

René Kelly, president of RL Industries, wishes to issue a press release to bolster his company’s image and maybe even its stock price, which has been gradually falling. As controller, you have been asked to provide a list of 20 financial ratios along with some other operating statistics relative to RL Industries’ first quarter financials and operations.

Two days after you provide the ratios and data requested, Erin Lourdes, the public relations director of RL, asks you to prove the accuracy of the financial and operating data contained in the press release written by the president and edited by Erin. In the news release, the president highlights the sales increase of 25% over last year’s first quarter and the positive change in the current ratio from 1.5:1 last year to 3:1 this year. She also emphasizes that production was up 50% over the prior year’s first quarter.

You note that the press release contains only positive or improved ratios and none of the negative or deteriorated ratios. For instance, no mention is made that the debt to assets ratio has increased from 35% to 55%, that inventories are up 89%, and that although the current ratio improved, the accounts receivable turnover fell from 12 to 9. Nor is there any mention that the reported profit for the quarter would have been a loss had not the estimated lives of RL plant and machinery been increased by 30%. Erin emphasized, “The press wants this release by early this afternoon” (Weygandt, et al. 2018).

Checklist:

(1) Who are the stakeholders in this situation?

(2) Apply two or more accounting codes of conduct to answer the following questions:

a. Is there anything unethical in President Kelley’s actions?

b. Should you as controller remain silent? Does Erin have any responsibility?

(3) Then compare your response regarding the accounting code of conduct questions above, to the ethical approaches in the tutorial.

a. Which accounting code of conduct responses to questions "a" and "b" above would be supported by two of the ethical approaches in the tutorial? Explain.

Answer 1

(1) The stakeholders are investors, lenders, suppliers, customers, government, and shareholders.

(2)

a. President Kelley is not presenting information about the company fairly and objectively. In the financial ratios, he is not declaring the underlying factors that have changed while comparison. For instance, he is comparing the financial ratios of this year with those of last year but he is not disclosing the fact that the life of assets have been increased this year.

Also, President Kelley is not providing all relevant information as he is withholding all the negative and deteriorated ratios.

He is not following the 'Credibility' standard of accounting code of conduct.

Thus making the actions of the President unethical.

b. This actions of President Kelley should be duly reported. We as a controller should take an action as soon as possible. As we have to adhere to the principles of Honesty, Fairness, Objectivity and Responsibility.

Accounting codes of conduct encourages everyone to participate in ethical way. Thus Erin also have responsiilty to report such matter.