CenturySound, Inc, produces cutting edge high-end audio systems that are sold primarily through major retailers. Any production overruns are sold to discount retailers, under CenturySound's private label SoundDynamX. The discount retail segment appears very profitable because the basic operating budget assigns all fixed expenses to production for the major retailers, the only predictable market. Several years ago, CenturySound implemented a 100% testing program. On average approximately 3% of production is found to be substandard and unacceptable. Of this 3% approximately 2/3 are reworked and the remaining 1/3 are scrapped. However, in a recent analysis of customer complaints, George Wilson, the Cost Accountant and Barry Ross, the Quality Control Engineer, have ascertained that normal rework does not bring the audio systems up to standard. Sampling shows that about 25% of the reworked audio systems will fail after extended operation within one year. Unfortunately, there is no way to determine which reworked audio systems will fail because testing will not detect this problem. CenturySound's marketing analyst has indicated that this problem will have a significant impact on the company's reputation and customer satisfaction if the problem is not corrected. Consequently, the Board of Directors would interpret this problem as having serious negative implications on the company's profitability. Wilson has included the audio system failure and rework problem in his written report that has been prepared for the upcoming quarterly meeting of the Board of Directors. Due to the potential adverse economic impact. Wilson has followed a long standing practice of highlighting this information. After reviewing the reports to be presented, the Plant Manager was upset and said to the Controller. "We can't trouble the Board with this kind of material. Tell Wilson to tone that down. People cannot expect their systems to last forever." The Controller called Wilson into his offce and said, "George, youll have to bury this one. The probable fallure of reworks can be referred to briefly in the oral presentation, but it should not be mentioned or highlighted in the advance material mailed to the Board." Wilson feels strongly that the Board will be misinformed on a potentially serious loss of income if he follows the Controller's orders. Wilson discussed the problem with Ross, the Quality Control Engineer, who simply remarked. "That's your problem, George." 1. Identify and discuss the ethical considerations that George Wilson should recognize in deciding how to precede in this matter. Support your answer by referring to the specific standards outlined in the IMA's Statement of Ethical Professional Practice. 2. According to the IMA's Statement of Ethical Professional Practice, what are the steps Wilson should take in order to resolve the
