Question

In Book, Introduction to Managerial Accounting (8th Edition), Q: Exercise P-4 Ethics and the Manager

Richmond, Inc. operates a chain of 44 department stores. Two years ago, the board of directors of Richmond approved a large-scale remodeling of its stores to attract a more upscale clientele. Before finalizing these plans, two stores were remodeled as a test, Linda Perlman, assistant controller, was asked to oversee the financial reporting for these test stores, and she and other management personnel were offered bonuses based on he sales growth and profitability of these stores. While completing the financial reports, Perlman discovered a sizable inventory of outdated goods that should have bee discounted for sale or returned to the manufacturer. She discussed the situation with her management colleagues: the consensus was to ignore reporting this inventory as obsolete because reporting it would diminish the financial results and their bonuses. 1. According to the IMA's Statement of Ethical Professional Practice, would it be ethical for Perlman not to report the inventory as obsolete? 2. Would it be easy for Perlman to take the ethical action in this situation?

Answer 1

1. As for IMA's statement of Ethical professional Practice it is not ethical for fear linda Perlman to not to report this innentoy as obselete a because its against popca professional ethics X Commitment to ethical professional practice include overarching principles. Ima's overarching ethical principles include, Honesty Faroness objectivity and Responsibility, į Linda Perlman takes a decesion to hide this report for the benefit of bonus it is not fair and which is against honesty to words towards employer . Au employu should not make a benefit by dipping Company is to loss. 2. No, It may not be easy for portar pearlman to take ethical achon because there may be lot of presure from management Collegues to hice this issue for their benefits. But how ener or what ever happens as on employee it is her Tes Responsibility to take an ethical decesion Csi lanner beneficial for the company,