A Case Study on Ethics and Accounting Personnel

Submitted To:

Prof. Dilip Kumar Sen, Instructor, School of Business,Independent University, Bangladesh. (IUB)

In partial fulfillment of the requirement of ACN-202;

Course: Management Accounting

Submitted By:

Sarkar Tarek AhmedID: 0330006

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Letter of Transmittal

Date: 19/02/06

Prof. Dilip Kumar SenInstructor, School of BusinessIndependent University, Bangladesh. (IUB)

Dear Sir:

Re: Review a Case Study on Ethics and Accounting Personnel

Enclosed please examine the interconnected components of my case study on Red Ball Beverage Company’s employment policy done by the controller D. W. “Butch” Laughton.

Red Ball Beverage Company has an equal opportunity employment policy. Where as company’s controller has made an unethical decision in hiring employees in the accounting department. The assistant controller Jack Myers opposed the decisions made by the controller.

My case study runs after controller’s decisions which violate standards of competence and integrity. Please observe the whole activities and recommend me.

Sincerely yours,

Sarkar Tarek AhmedACN 202, Sec: 04ID: 0330006rivertarek@yahoo.com

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Executive Summary

Every company should have an equal opportunity employment

policy which is stated on the human resource management policy

of Red Ball Beverage Company. In one of their employee hiring

Processes Company’s controller D. W. “Butch” Laughton hired

five employees. Among the selected employees three were sons of

close friends of Laughton and no minorities. And the assistant

controller Jack Myers also interviews candidates and he felt that at

least two of the minority candidates were very well qualified and

the sons of Laughton’s friends were definitely not among the most

qualified. Where as a short list of thirteen from a total of 175

candidates had been interviewed. Laughton’s decisions violate

standards of competence and integrity. That’s why the decision was

obviously unethical.

And when Myers questioned Laughton concerning his reservations

about the hiring practices, he was told that these decisions were

Laughton’s and not his, so he should not question them. In that

situation Myers should send an explanatory memo to an

appropriate high-level official of the company. Otherwise he

should go to the only person external to the company with whom it

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is appropriate to discuss this issue is a confidential objective

advisor.

Table of Contents

Introduction……………………………..Page: 05

Theme………………………………….. Page: 06

Main Issue………………………………Page: 06

Analysis & Interpretation……………….Page: 07

Problems & Challenges…………………Page: 08

Conclusions & Recommendations……...Page: 09

A Select Bibliography…………………..Page: 10

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Introduction

Management accountants have an obligation to the organizations.

And they should serve mainly with the four standards of ethical

conduct. These are Competence, Confidentiality, Integrity and

Objectivity. Here in the case of employee hiring policy of Red Ball

Beverage Company; we find some inequality. Hiring in the

accounting department is done by the controller D. W. “Butch”

Laughton. The assistant controller Jack Myers also interviews

candidates, but Laughton makes all decisions. Once in a hiring

process Laughton hired five candidates from the short list of

thirteen candidates. Among five three were sons of close friends of

Laughton and no minorities. Where as according to Myers there

were very well qualified candidates (Two from minority) and three

sons of Laughton’s friends were definitely not among the most

qualified. So it is almost clear to us that Laughton’s decisions

violate standards of competence and integrity.

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Theme

The controller is the top accounting officer of an organization. If

we consider the four ethical conducts for Management Accountant;

we see that an appropriate level of Professional competence must

be maintained. Relevant laws, regulations and technical standard

must be followed that is called Competence. In the case of

Confidentiality Management Accountants must not disclose the

confidential information and he or she must do their duties

ethically that is Integrity. And Management accountants must

communicate information fairly and objectively. They must

disclose all relevant information that could reasonably be expected

to rightly guide the users in making decisions.

Main Issue

Our core focus is on the Company’s hiring process. Did they

(Controller and the assistant controller) follow all of the standards

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of ethical conduct which are must be followed by Management

accountants?

Analysis and Interpretation

Management accountants have an obligation to the organizations

they serve with the following standards: Competence,

Confidentiality, Integrity and Objectivity. In the case of Red Ball

Beverage Company controller Laughton’s decisions violate standards of

competence and integrity. Competence is violated because the most

competent persons were not hired. Integrity is violated because hiring was

done for the personal interest of Laughton at the expense of the company.

The practice threatens the company’s equal employment opportunity policy.

In the case of the assistant controller who also interviewed the candidates,

we can suggest the following steps. His first step should be to discuss the

situation with his boss. Since here his suggestion against the unethical act

was not earlier accepted by Laughton, he would need to go to Laughton’s

Superior. If the matter is not resolved he should continue until reaching the

president, if equal employment opportunity is the Company’s genuine

policy, the president should be very concerned about Laughton’s actions.

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Problems and Challenges

Problems are everywhere in the world. Nothing can be solved

without facing problems. In this situation if the matter not resolved

at this level, Laughton should go direct to the Board of Directors.

If at this level also Myers is not satisfied, he may have no resource

but to resign, sending an explanatory memo to an appropriate high-

level official of the company. On the other hand Myers should not

go to the press to disclose the matter so that press puts pressure on

the company, because this decision violates Confidentiality ethical

standard of the Management Accountants. In fact the only person

external to the company with whom it is appropriate to discuss this

issue is a confidential objective advisor according to the objectivity

standard of ethical conduct.

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Conclusions and Recommendations

Managerial Accounting is a part of an organization’s Management

Information System (MIS). Its objectives are to provide managers

with information for decision-making and planning and to assist

managers in directing and controlling operations. And motivate

managers toward the organization’s goals and measuring the

performance of managers and subunits within the organization.

Since the Controller is the top accounting officer of an

organization, he or she must follow up the standards of ethical

conduct for Management Accounting. Managers at all level and

other officials of an organization must not do any work that would

discredit the profession or the organization’s internal or external

environments. Finally we can propose that Laughton and Myers

should follow the Standards of Ethical Conduct to maintain the

equal opportunity employment policy. They should follow the rule

for the honor of their profession as well as for their organizational

standard.

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A Select Bibliography

Text book:

Horngren, Sundem and Stratton, 1999: Introduction to

Management Accounting, 11th edition, Upper Saddle River, New

Jersey: Prentice Hall

C 1: Managerial Accounting & the Business Organization: P 35

Class Lectures: (by)

Prof. Dilip Kumar Sen

Instructor, School of Business

Independent University, Bangladesh. (IUB)

Website (s):

www.thoracic.org/sections/ education/resources/cmetoolkit.doc

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…………………………May God Bless You……………………..

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