a Ethical Issue You have just begun your summer internship at Omni Instruments. The company supplies sterilized surgical instruments for physicians. To expand sales, Omni is considering paying a commission to its sales force. The controller, Matthew Barnhill, asks you to compute: (1) the new breakeven sales figure, and (2) the operating profit if sales increase 15% under the new sales commission plan. He thinks you can handle this task because you learned CVP analysis in your accounting class. You spend the next day collecting information from the accounting records, performing the analysis, and writing a memo to explain the results. The company president is pleased with your memo. You report that the new sales commission plan will lead to a significant increase in operating income and only a small increase in breakeven sales. The following weck, you realize that you made an error in the CVP analysis. You overlooked the sales personnel's $2,800 monthly salaries, and you did not include this fixed selling cost in your computations. You are not sure what to do. If you tell Matthew Barnhill of your mistake, he will have to tell the president. In this case, you are afraid Omni might not offer you permanent employment after your internship Requirements 1. How would your error affect breakeven sales and operating income under the proposed sales commission plan? Could this cause the president to reject the sales commission proposal? 2. Consider your ethical responsibilities. Is there a difference between: (a) initially making an error and (b) subsequently failing to inform the controller? 3. Refer to the IMA's Statement of Ethical Professional Practice (p. 12). Review the four broad areas of ethical standards by which members must comply. Identify the four standards in order to completo requirement 3. (This step is for your information) 4. Assume that you do nothing about the error you discovered. You do not admit that the original analysis may have a material crror. Identify which of the four standards of IMA's Statement of Ethical Professional Practice that would be violated and those that would not be violated. Be specific and adequately explain your conclusion based on the IMA's definitions of the standards. b. Be sure all four standards are addressed in your analysis. 5. Suppose you tell Matthew Barnhill of the error in your analysis. Why might the consequences not be as bad as you fear? Should Barnhill take any responsibility for your error? What could Barnhill have donc differently? 6. After considering all the factors, should you inform Barnhill or simply keep quiet? 7. Many professional groups maintain formal professional standards and guidelines. Describe the benefits much standards provide in helping an individual work through ethical decision making. Der 1
