Ethics is often an integral part of internal controls. Read the case study presented below and then answer the questions using the ethical analysis framework that we referred to throughout the trimester.

You are a CPA Qualified Management Accountant working in the Plastics division of a large multinational corporation. You work for John, who is the Divisional Manager for the Plastics division. John has a background in Engineering. You are responsible for preparing the monthly management pack provided to John and forwarded to the international head office.

The plastics market has reached a mature stage and the divisions results have been stable for a number of years. However, recently the results have started to decline. The latest monthly management pack reports another decline in the divisions profit and no growth in sales. John is worried that head office is planning to shut the division as this would mean that 230 people will lose their job.

John has reviewed the monthly management pack and instructed you to change the accounting treatment of unearned income to bring forward sales and increase the reported profit. You have tried to explain to John that the head office determines the accounting policies in accordance with International Accounting Standards. John has again instructed you to make the change or risk losing your job.

Required:

1. Briefly explain the underlying ethical issue.

2. Name five (5) parties (stakeholders) that may be harmed by the change requested by John.

1

2

3

4

5

3. As the Management Accountant working in this corporation, name two (2) of your responsibilities and obligations.

4. Describe three (3) courses of action that you (as the Management Accountant) can take and evaluate the consequences of each course of action.