Ethical dilemmas relating to standards (Learning Objective 3) Austin Landers is the accountant for Sun Coast, a manufacturer of outdoor furni¬ ture that is sold through specialty stores and Internet companies. Annually, Landers is responsible for reviewing the standard costs for the following year. While review¬ ing the standard costs for the coming year, two ethical issues arise. Use the IMA’s Statement of Ethical Professional Practice (in Chapter 1) to identify the ethical dilemma in each situation. Identify the relevant factors in each situation and suggest what Landers should recommend to the controller.
Issue 1 Landers has been approached by Kara Willis, a former colleague who worked with Landers when they were both employed by a public accounting firm. Willis recently started her own firm, Willis Benchmarking Associates, which collects and sells data on industry benchmarks. She offers to provide Landers with benchmarks for the outdoor furniture industry free of charge if he will provide her with the last three years of Sun Coast’s standard and actual costs. Willis explains that this is how she obtains most of her firm’s benchmarking data. Landers always has a difficult time with the standard-setting process and believes that the benchmark data would be very useful.
Issue 2 Sun Coast’s management is starting a continuous improvement policy that requires a 10% reduction in standard costs each year for the next three years. Dan Jones, manufacturing supervisor of the Teak furniture line, asks Landers to set loose stan¬ dard costs this year before the continuous improvement policy is implemented. Jones argues that there is no other way to meet the tightening standards while main¬ taining the high quality of the Teak line.