Introduction
Management accounting is mainly concerned with the use of the accounting provisions to give managers to make conclusive and reliable information that can enhance appropriate decision making. It essentially includes methods and concepts that can facilitate effective decision making, control and plan formulation. Management accounting is somehow different to financial accounting. This is because management accounting mainly focuses on future predictions and on information that enhance better decisions making. Management accounting is mainly to be used by managers and unlike the financial reports; management reports are not publicly reported. However, the similarity on the two disciplines is that they are both required to conform to a particular code of ethics (Selto, Curry & Horngren, 2008).
For management accounts, all members are regulated by a code of ethics. This code of conduct and ethics seek to ensure that the practicing professionals and organization will uphold a certain level of professionalism. The ethical guidelines or principals include: honesty, fairness, objectivity and fairness. In management accounts, the professionals are required to observe: competence, integrity, confidentiality and credibility. This implies that members of the organization should act in accordance to this stipulations and encourage on others to follow suit
Failure to comply with these tenets will automatically call for disciplinary action.
Christen Madsen in the Appliance division of Solequin Corporation is in a dilemma. The dilemma cuts across the ethical guidelines governing professionals in the management accounting field. Lance Jusic the general manager of the organization wants a 5 percent cut in the next years direct labor costs estimates. The cut is aimed at maintaining a reserve that will eventually boost end years operating income. The issue defies various standards in the management accounting professional. This is because by doing so the tenet of competence, integrity and credibility are violated. The manager’s preposition clearly violates the competence standard. This is because, the standard requires that the information to be accurate and clear. However, the manager wants estimation be made to facilitate the Christmas bonus thus undermining the competence tenet (Khan & Jain, 2010).
The standard of integrity requires the management accountants to carry themselves in a way that does not discredit the professionals. This is only achievable if the professionals carry out their responsibilities ethically. The general manager’s proposal also violates this principal. With regards to credibility, the information should be objective and the user should be aware of all relevant facts that included as the information availed was being compiled. Hence, the general manager’s preposition has led to a violation of all the discussed standard requirements (Fernando, 2009).
However, if Lance insists that Christen undertakes the duty even after she conveys her dissatisfaction, the following remedy is available:
Since Lance is the general manager, christen should seek a resolution with the managing director of Solequin Corporation. However, if Lance is the most senior person, then Christen should air her grievances to a committee: for instance the audit or executive committee, board of directors or trustees or even the owner. However, before communicating with external authorities, Christen should ensure that there is a vivid breach of law. Christen should also consider obtaining advice from an ethics counselor on the viable cause of action. In instances of breach of law, Christen should seek advice from an attorney.
Christen is fully aware that the requirements of the general manager are unethical. This is because, with the provision of the Christmas bonus Christen will be violating multiple standards. With theses facts, Christen should not indulge in the unethical practices.
The Christmas bonus will be as follows:
$
estimated direct labor hours
110000
predetermined overhead rate
20
estimated overhead costs for the year
2200000
$
estimated direct labor hours
105000
predetermined overhead rate
20
estimated overhead costs for the year
2100000
difference in overhead cost(Christmas bonus)
100000
Conclusion
A code of conduct and ethics seek to ensure that the practicing professionals and organization uphold a certain level of professionalism.it is as such prudent for managers to abide by the set stipulations in the IMA code of ethics.
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