Question

You were hired to do a cost analysis report for Project A, including Activity Based Costing, by Shirley, At a recent meeting, you gave Shirley and the factory manager your estimate that the delay to Project A will be a minimum of three months. You indicated that extra overhead costs under ABC are likely to be 7 to 10 million dollars. Shirley asked your team to begin working on a formal report specifying detailed recommendations. While still incomplete, the report appears certain to support your estimates. You are aware that the group is rumored to have difficulties with its bankers. You assume that the situation with Project A is likely to be seriously detrimental to the company’s financial position. One week before the final version of the report is due, you receive a surprise telephone call from the company’s CFO. He explains that he is about to enter a board meeting, and needs to know a date for delivery of the report on Project A. Late the previous evening, Shirley had informed the CFO that your firm had been asked to provide the report. He says: “I appreciate that you have only just started, so there are no reliable estimates yet. But, Shirley mentioned that Project A could incur around 4 to 5 million dollars in extra costs, with income delayed by perhaps six to eight weeks. Shirley will not be at board meeting, as she has to attend a family funeral. Since Shirley will not be in the meeting, there is no need to mention the extra costs and the delays at this time.” Based upon the IMA Ethical Standards, is the CEO’s request ethical? Write an essay of at least 5 paragraphs stating and supporting your decision, including how you think you should do regarding the CEO’s request.

Answer 1

IMA members have a responsibility to comply with and uphold the standards of Competence, Confidentiality, Integrity, and credibility. Failure to comply may result in disciplinary action. In the current situation Shirley, appointed the firm for report on cost analysis of the Project A, including ABC costing. Based on the firm estimates the delay in Project A would result in delay of minimum three months and estimated that extra overhead costs under ABC are likely to be 7 to 10 million dollars. One week before the final version is due, Shirley asked team to Project A could incur around 4 to 5 million dollars in extra costs, with in- come delayed by perhaps six to eight weeks and he was not available to attend the meeting. As per the IMA ethical standards, management account has to follow: o Has to perform the professional duties in accordance with the relevant laws, regulations, and technical standards. o Provide decision support information and recommendations that are accurate, clear, concise, and timely. Recognize and help manage risk. o Abstain from engaging in or supporting any activity that might discredit the profession. o Contribute to a positive ethical culture and place integrity of the profession above personal interests. o Report any delays or deficiencies in information, timeliness, processing, or internal controls in conformance with organization policy and/or applicable law. In the current case CEO has request is unethical as it involves in reporting of the deficiencies of the information. Since the group is ru- moured to have difficulties with its bankers. Project A is likely to be seriously detrimental to the company's financial position.