Case Information Steve Morgan, controller for Newton Industries, was reviewing production cost reports for the year. One amount in these reports continued to bother himadvertising. During the year, the company instituted an expensive advertising campaign to sell some of its slower-moving products. Although the advertising campaign had been completed during the year, it was still too early to tell whether it was successful. There had been much internal debate as how to report the advertising cost associated with this campaign. The Vice President (VP) of Finance argued that the advertising cost should be reported as a cost of production, just like direct materials and direct labor. He therefore recommended that this cost be identified as manufacturing overhead and reported as part of inventory until sold. However, Steve believed that the advertising cost should be reported as an expense in the current period, so as not to overstate net income. Others in the company argued that it should be reported as prepaid advertising and reported as a current asset. The President of Newton Industries finally came to a decision. She argued that the advertising cost should be reported as inventory, in line with the VP of Finance's belief. The President's arguments were practical ones. She noted that the company was experiencing financial difficulty and expe this amount in the current period might jeopardize a planned bond offering. She also said that the advertising cost should not be reported as prepaid advertising, since reporting it that way might generate too much attention from the financial community. Questions and Templates for Your Responses NAME: (5 points) 1. Who are the direct and indirect stakeholders in this situation? Indirect stakeholders do not act on the decision but may be affected by action of direct stakeholders. (10 points) The direct stakeholders in this situation are write your answer The indirect stakeholders in this situation are write your answer 2. What are the ethical issues involved in this situation? What ethical dilemma(3) might Steve be facing here? (15 points). An ethical dilemma occurs when values conflict such as when personal values conflict with organizational values The ethical dilemma(s) involved in this case for Steve is (are) write your answer 3. Which principles of the IMA Statement of Professional Echical Practice are involved in Steve's decision? Explain the reason(3) you chose any principle(). (10 points) The Principle(s) of (choose one or more among Honesty, Fairness, Objectivity and Responsibility) applies (apply) because (state your reason why each principle you chose applies). State the top 3 part(s) of the standard(s) involved by reviewing the slides we went over in class. If you list more than 3 parts, I will grade only the first 3. Remember that you are in Steve's shoes. For this question, you do not have to state your rationale for the parts you choose. Remember there ate 4 point The Standards of Competence and Confidentiality each have 3 points listed. The Standards of Integrity and Credibility each have 4 points listed. (15 points, only 5 points if you do not mention parts within the standard chosen 4. Point (choose among points 1 to 4 depending on which standard) of Standard(s) of (choose among Competence, Confidentiality, Integrity and Credibility. The Standards of Competence and Confidentiality each have 3 points listed. The Standards of Integrity and Credibility each have 4 points listed Redo this for each applicable point within each Standard. For an example that does NOT apply to this case: Point 1 of the Standard of Confidentiality, "Keep information confidential expect when disclosure is authorized or legally required" applies 5. What are the possible alternative actions involved in Steve's decision? What do you think should Steve do in this situation? (10 points) The possible alternatives in Steve's situation are (State all alternatives including doing nothing). I think Steve should (state what you think Steve should do) 6. In the context of this situation, what does the IMA Statement of Professional Echical Practice suggest for resolving ethical issues? (15 points) The IMA Statement of Ethical Professional Practice suggests the following steps for resolving ethical issues: State each step listed within the "Resolving Ethical Issues" Section of the IMA Statement of Ethical Professional Practice. Remember to read the paragraph before the list of actions, because it contains an important surgestion. You may also look at the Ethics PowerPoint slides