50% Page 505 ATC 13-5 Ethical Dilemma Asset replacement clouded by self-interest John Dillworth is in charge of buying property used as building sites for branch offices of the National Bank of Commerce. Mr. Dillworth recently paid $110,000 for a site located in a growing section of the city. Shortly after purchasing this lot, Mr. Dillworth had the opportunity to purchase a more desirable lot at a significantly lower price. The traffic count at the new site is virtually twice that of the old site, but the price of the lot is only $80,000. It was immediately apparent that he had overpaid for the previous purchase. The current market value of the purchased property is only $75,000. Mr. Dillworth believes that it would be in 962 the bank's best interest to buy the new lot, but he does not want to report a loss to his boss, Kelly Fullerton. He knows that Ms. Fullerton will severely reprimand him, even though she has made her share of mistakes. In fact, he is aware of a significant bad loan that Ms. Fullerton recently approved. When confronted with the bad debt by the senior vice president in charge of commercial lending, Ms. Fullerton blamed the decision on one of her former subordinates, Ira Sacks. Ms. Fullerton implied that Mr. Sacks had been dismissed for reckless lending decisions when, in fact, he had been an excellent loan officer with an uncanny ability to assess the creditworthiness of his customers. Indeed, Mr. Sacks had voluntarily resigned to accept a better position. Required a. Determine the amount of the loss that would be recognized or had voluntarily resigned to accept a better position. Required a. Determine the amount of the loss that would be recognized on the sale of the existing branch site. Identify the type of cost represented by the $110,000 original b. purchase price of the land. Also identify the type of cost represented by its current market value of $75,000. Indicate which cost is relevant to a decision as to whether the original site should be replaced with the new site. c. Is Mr. Dillworth's conclusion that the old site should be replaced supported by quantitative analysis? If not, what facts do justify his conclusion? Assuming that Mr. Dillworth is a certified management accountant (CMA), do you believe the failure to replace the land violates any of the standards of ethical professional practice in Exhibit 10.19 in Chapter 10? If so, which standards would be violated? d. EXHIBIT 10.19 Statement of Ethical Professional Practice Members of IMA shall behave ethically, A commitment to ethical professional practice includes overarching principles that express our values, and standards that guide our conduct. IMA's overarching ethical pnnaiples Indude: Honesty, Famess,Objectivity,and Responsibility Members shall act in accordance with these principles and shall encourage others within their organizations to adhere to them. A member's falure to comply with the following standards may result in disaiplinary action. Competence Each member has a responsibelity to Maintain an appropriate level of professional expertise by continually developing knowledge and skills. Perform professional dutes in accordance with relevant laws, regulatons, and technical standards . Provide dectsion support informaton and recommendations that are accurate, clear, concise, and timely Recogntze and communicate professional imitations or other constraints that would predude responsible judgment or successtul performance of an activity. Confidentiality Each member has a responsiblity to Keep information confidential except when disclosure is authortzed or legally required Inform all relevant parties regarding appropnate use of confidentual informaton Monitor subordinates' activites to ensure compliance. . Refrain from using confidential information for unethical or ilegal advantage Integrity Each member has a responsibility to . Refrain from engaging in any conduct that would prejudice carrying out dutes ethicaly Credibility Each member has a responsibility to Mitgate actual conflicts of interest and avoid apparent conflicts of interest. Advse all parties of any potental conficts Abstain from engaging in or supporting any activity that might discredit the profession. Communicate information fairly and objectvely Disdose all relevant Information that could reasonably be expected to influence an intended user's understanding of the reports, analyses, or recommendations. . Disclose delays or defidencles in Information, timeliness, processing, or internal controls in conformance with organization polcy and/or applicable law. Resolution of Ethical Conflict In applying these standards, you may encounter problems identifying unethical behavior or resolving an ethical conflict. When faced with ethical issues, follow your organtzation's established policies on the resolution of such conflict If these polilcles do not resolve the ethical conflict, consider the following courses of action: Discuss the issue wth your mmediate supervtsor except when it appears that the supervtsor is Involved. In that case, present the issue to the next level If you cannot achieve a satisfactory resolution, submit the tssue to the next management level. Communication of such problems to authorties or individuals not employed or engaged by the organtzation is not considered approprtate, unless you believe there s a dlear violation of the law . Clanty rolevant othcal sues by intlating a contidental dscussion wth an IMA Ethics Counselor or other mpartaldsr to obtan a better . Consult your own attorney as to legal obligations and rights conceming the ethical conflict. understanding of possible courses of action