Outdoor Living, Essay Example

In looking at the scenario, the events of Rita Lane and Dan Jacobs raise several ethical issues in which contradict the ethical standards of the accounting industry. Rita’s job is to review the standard costs for the upcoming year for the organization. The purpose of standard costs are to substitute the estimated cost for the actual cost in accounting. Rita periodically changes the numbers through the variances in the costs, which must be up to the accountant to get right. Rita is useful for budging, price formulation, inventory costs, and other costs. However, the disadvantages come with contracts with customers, variances can create unethical and incorrect actions that influence illegal behavior. Rita has to be alert because the fast pace of the environment can create problems when formulating the variances in standard costs.

Professionals that work in the same industry, often rely on each other for favors in helping organizations. Rita is faced with the dilemma of helping her friend or former colleague Lane, by supplying him with standards and actual costs of Outdoor Living. The problem lies in the fact that, on of the first principles of the IMA Ethical Guidelines is the matter of confidentiality in which, “Keep the information confidential except when disclosure is authorized or legally required” (IMA 1). Rita must tell her colleague Lane that she cannot provide him with the information because it goes against the principles within the organization, as well as a legal obligation, in which sharing confidential information can be a breach of security and employment contract. Rita if caught, can be fired, strongly disciplined, or be prosecuted in the court of law. While Rita may not think that giving Lane the information is for personal gain, she will be exchanging sensitive confidential financial information to another company (colleague) in exchange for benchmarks, which will help her in accounting. By disclosing and using the internal information for whatever reason, not in compliance with the organizations’ policy, it destroys the trust the organization has in Rita, and set the organization up for legal consequences. The second ethical dilemma of this situation involves competence and integrity. Lane must apply her professional knowledge to competently determine the standard costs. The integrity standard means that Lane should not subvert Outdoor Living’s legitimate and ethical goals. Lane’s standard cost decisions are especially critical this year because, these standards will be the basis for the continuous improvement policy that will apply for three more years. However, Lane’s immediate responsibility is to establish standards that are consistent with company policy. The appropriateness of the continuous improvement policy is a separate issue.

In manufacturing organizations such as Outdoor Living, utilize standard accounting by creating journal entries in which make debit entries that are based on the perceived actual quantity output, which is eventually changed periodically. Rita’s role in being in the position to review and record standard costs places her in a position to follow the outlined legal and ethical guidelines for each organization. Following Jacobs’ suggestion would circumvent the intent of the continuous improvement policy. Jacobs may have a legitimate concern about maintaining the quality of the Teak line, or he may be more concerned about his future performance evaluations. Lane should suggest that Jacobs talk to his own superior about his concerns. To show some understanding for Jacobs’ concern, Lane may offer to speak with the controller about the feasibility of reducing standard costs by 10% each year for 3 years in a row. Asking Rita to record incorrect amounts, creates an ethical dilemma in which Rita must infer to her accounting principles that she would be able to demonstrate honesty and integrity in the workplace.  In creating the policy and asking Rita to record loose standard costs, it is also a deceitful method in which changes the way in which expenses and other costs are calculated over the period. The policy, while seeming plausible to Jacobs, is not to Rita which follows ethical guidelines.

According to the IMA Ethical Guidelines, if Rita feels that she is placed in an uncomfortable situation in which she is pressured into an ethical dilemma, she has several options. As mentioned above, instruct Jacobs to confer with his supervisor, however Rita can also discuss the issue with her supervisor, or the next in line, if the conflict is not addressed properly. She can also consult the whistleblower hotline, and discuss the information confidentially with an IMA Ethics Counselor in order to sort out the manner. Rita has a legal and ethical responsibility to perform her work duties with integrity, and ounce of credibility, and honesty in performing her duties. Misrepresenting costs, even standard costs are wrong and can place the entire budget, and other expenses out of order.

Works Cited

“IMA Ethical Guidelines.” IMA. 2014. Web. 14 May 2014. Http://www.imanet.org/pdfs/statement%20of%20Ethics_web.pdf