Question

Suzette Washington financed her college education by working as an inventory clerk for Bertolini’s, a clothing store chain located in the southeastern United States. Bertolini’s caters primarily to fashion-conscious young men and women. The com­pany’s stores carry a wide range of clothing, including casual wear, business suits, and accessories. The Bertolini’s store for which Suzette worked is located a few blocks from the campus of the large state university that she attended. Except for management personnel, most of Bertolini’s employees are college students. Suzette’s best friend and roommate, Paula Kaye, worked for Bertolini’s as a sales clerk. Paula majored in marketing, while Suzette was an accounting major.

During Suzette’s senior year in college, Bertolini’s began experiencing abnormally high inventory shrinkage in the store’s three departments that stocked men’s apparel. Suzette’s supervisor, an assistant store manager, confided in her that he believed one or more of the sales clerks were stealing merchandise. Over lunch one day in the student union, Suzette casually mentioned the inventory problem to Paula. Paula quickly changed the subject by asking Suzette about her plans for the weekend.

“Paula, rewind for just a second. Do you know something that I don't?”

“Huh? What do you mean?”

“Missing inventory . . . shrinkage . . . theft?”

After a few awkward moments, Paula stopped eating and looked squarely into her friend’s eyes. “Suzette, I don't know if it’s true, but I’ve heard a rumor that Alex and Matt are stealing a few things each week. Polo shirts, silk ties, jeans. Occasionally, they take something expensive, like a hand-knit sweater or sports jacket.”

“How are they doing it?”
“I’ve heard - and don’t repeat any of this now – I’ve heard that a couple of times per week, Alex stashes one or two items at the bottom of the trash container beneath the number two cash register. Then Matt, you know he empties the trash every night in the dumpster out in the alley, takes the items out and puts them in his car.”

“Paula, we can’t let them get away with this. We have to tell someone.”

“No we don't. Remember, this is just a rumor. I don’t know that it’s true. If you tell a manager, there will be questions And more questions. Maybe the police will be brought in. You know that eventually someone’s going to find out who told. And then . . . slashed tires . . . phone calls in the middle of the night.”

“So, don’t get involved? Don’t do anything? Just let those guys keep stealing?”

“Suze, you work in inventory. You know the markup they put on those clothes. They expect to lose a few things here and there to employees.”

“Maybe the markup wouldn’t be so high if theft wasn’t such a problem.”

Now, there was no doubt in Paula’s mind that Suzette was going to report the alleged theft scheme to management. “Two months, Suze. Two months till we gradu­ate. Can you wait till then to spill the beans? Then we can move out of state before our cars are spray-painted.”

One week following Suzette and Paula’s conversation, a Bartolini’s store manager received an anonymous typed message that revealed the two person theft ring rumored to be operating within the store. Bertolini’s immediately retained a private detective. Over a four week period, the detective documented USD500 of merchandise theft by Alex and Matt. After Bertolini’s notified the police, the district attorney filed criminal charges against the two young men. A plea bargain agreement arranged by their attorneys resulted in suspended prison sentences for Alex and Matt. The items of that agreement included making restitution to Bertolini’s, completing several hundred hours of community service and a lengthy period of probation.

Accounting majors are preparing to enter a profession recognized as having one of the strongest and most rigorously enforced ethical codes. Given this fact, do you believe that accounting majors have a greater responsibility than other business majors to behave ethically?

Answer 1

Ethical codes are the fundamental principles that accounting professionals choose to abide by to enhance their profession, maintain public interest and demonstrate honesty and fairness. An Accountant is bound by Code of Ethics made up of five fundamental principles -

• Integrity - Being straightforward, honest and truthful in all professional and business relationships. One must maintain professional skeptism and should not believe a misleading fact to be true
• Objectivity - An accountant should be biased or get influenced by another person. His personal interest should not come inbetween his professional duties.
• Professional competence and due care - an Accountant should be committed to his professional knowledge and skill. He is should also coach and guide his subordinates
• Confidentiality - No professional information or client details should be misused without the clients permission.
• Professional behaviour - An Accountant should not land up in any legal proceedings or law suits against him. He should always comply with laws and regulations.

The code establishes a conceptual framework that requires a professional accountant to identify, evaluate and address threats to compliance with the fundamental principles. Hence he has a greater responsibility than other business majors to behave ethically. Accountant should always exercise sound moral judgement in all his activities. Accountants have a huge responsibility to provide clients with professional services and safeguard their financial information. Accountants handle private information and help us making big financial decisions that impact a business. Hence an accountant should be qualified, experienced and trustworthy.

Ethics in accounting includes both strict adherence to guidelines and careful assessment of unique situations where professional judgment is necessary. Understanding the ethical frameworks for independence, integrity, confidentiality and professional competence can guide decision-making and help preserve the reputation of the field.