Channels is a manufacturer of flatware that is grade-rolled rather than stamped. The flatware is sold in upscale stores as a high-quality item. The company sells the goods that are
within specifications at regular prices to the stores. If a piece doesn’t pass inspection, it is put through a second inspection, and if useable, is sold at a highly discounted price to low-end stores. In recent years, the company’s average yield as been 93% of first-quality products. Last year, the company put in place a performance-evaluation system that utilizes both profit numbers vs. budget and budgeted yield, which had been set at 93% based on recent year history.
When Fannie May, the company controller, was reviewing the performance evaluation results, she noted that the yield percentage was 96% in the year just ended, which resulted in significantly better than budgeted profits. Ms. May decided to investigate.
The supervisor in the quality control department was happy to show Ms. May what changes were made that resulted in the improved yield percentage. In short, the supervisor of the department, following the manager’s instructions, had changed the measuring procedure to determine what was “within specification” such that more pieces were in compliance than before. Ms. May worried that the customers would be unhappy with the lower quality of the pieces they would be receiving.

Required

1. What should Ms. May do? You may want to refer to the IMA Statement of Ethical Professional Practice.
2. Which lever of control is Channels emphasizing? What changes, if any, should be made?