Electronics Enterprises Limited (EEL) developed a high-speed low-cost copying machine. The Machine was marketed primarily for home use. However as EEL customers learned how easy and inexpensive to make copies with the EEL machine, its use by small businesses grew. Sales soared as some businesses ordered large numbers of copiers. However, the heavier use by these companies caused breakdowns in certain components of the equipment. The Copier had a two-year warranty regardless of usage. Consequently, EEL experienced high costs for replacing damaged components.

As the quarterly meeting of the Board of Directors of EEL approached Chris Kwame the assistant controller was asked to report on the situation. Unfortunately, it was hard to predict the exact effects. However, it seemed that many business customers were starting to switch to more expensive copiers sold by competitors. It was clear that the increased maintenance costs would significantly affect EEL's profitability. Chris summarized the situation as best as he could for the Board

Connelly Kodjo, the Controller of EEL was concerned about the impact of the report on the Board. She does not disagree with the analysis but thinks it makes management look bad and might even lead the Board to discontinue the product. She is convinced from a conversation with the head of engineering that the copier can be slightly redesigned to meet the needs of higher volume users, so discontinuing it may pass up a potentially profitable opportunity.

Connelly called Kwame to her office and asked him to delete the part of this report dealing with the component failures. She said it was alright to mention this orally to the Board. Kwame however feels very strongly that such a revision in his report would mislead the Board about a potentially significant negative impact on the Company's earnings.

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Required.

1. Based on the Managerial Accountants Ethical Standards explain how Connelly's request to Kwame is unethical. (10 Marks) (Hint; ethical standards are Professional Competence, Confidentiality, Integrity, and Objectivity)
2. How should Kwame resolve the Issue (5 Marks)