Case #1

Fidelity, Inc is a very successful investment firm that had been able to give a 50% bonus to its executive management group each of the past 3 years; a trend that is expected to continue. In addition, the CEO has received a 100% bonus during this time. These executives own 45% of the stock of the firm.

Recently, Fidelity has become a candidate for a corporate takeover, which will occur of these corporate raiders can acquire 51% of the shares of stock. If the acquisition occurs, executive management could be subject to losing their jobs with the firm. Thus, the management group is considering making changes to some of the current accounting practices, which are not in accordance with GAAP, but that would make Fidelity appear as a less attractive acquisition candidate. The management group has informed the controller to implement these changes. The controller has learned that the management group has no plans to disclose these changes to anyone outside of their group.

POST your RESPONSE to the following:

Using the code of ethics for management accountants (in your text and posted in INFORMATION), a) discuss 2 of the ethical standards that are being violated by the proposed accounting changes (be sure and explain why the standard is being violated), b) explain what the controller should do (specific steps) to resolve the ethical dilemma.