Question
Imprint Pty Ltd, a producer of a range of 3D printers and associated peripherals, has recently hired Geoff Walker as a cost accountant. During his
Imprint Pty Ltd, a producer of a range of 3D printers and associated peripherals, has recently hired Geoff Walker as a cost accountant. During his first few months on the job, Walker discovered that Imprint had been underapplying manufacturing overhead to the work in process account, while overstating selling and administrative expenses. This practice has been going on since the start of the company, which is in its sixth year of operation. The effect in each year has been favourable, as it has allowed the company to pay less tax over the years. No internal audit function exists at Imprint, and the external auditors have not discovered the underapplied factory overhead. Prior to the sixth-year audit, Walker pointed out the practice and its effect to Gina Grey, the Chief Financial Officer (CFO), and asked her to let him make the necessary adjustments. Grey directed him not to make the adjustments but to wait until the external auditors had completed their work and see what they uncovered. The sixth-year audit was completed, and the external auditors once again failed to discover the underapplication of factory overhead. Walker again asked Grey for approval to make the required adjustments, which was refused once again. Walker maintains that the adjustments should be made and that the external auditors should be informed of the situation. Since there are no established policies at Imprint for resolving ethical conflicts, Walker is considering one of the following three courses of action: A. Follow Greys directive and do nothing further. B. Attempt to convince Grey that the proper adjustments should be made and the external auditors advised. C. Advise the audit committee and supply appropriate accounting data to provide evidence of the problem. what are the ethical issues In this case? which standards from IMA statement have been violated? what ethical action should be done? what is the proposed solution?
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