Problem 1-31 Quality Control Ethical Behawior (LO1-6, 1-7, 1-10, 1-11) The balance icon flefty identilies an ethical issie AccuSound Corporation manufactures printed circuit boands for stereo amplifiers. A common product defect is a "driff" eatsed ty fititurt to maintain precise heat levels during the production process. Rejects from the 100 percent testing program are reworked to acceptable levels if the defect is drift. However. in a recent analysis of customer corsplaints. Amahle Khumale, the assistant controller, and the quality control engineer determined that normal rework does not bring the printed circuit boards up to standard. Sampling showed that about half of the reworked bourds will fail after extended amplifier operation. The incidence of failure in the reworked boards is projected to be about 10 percent over five years. Unfortunately, there is no way to determine which reworked printed circuit boards will fail because testing will not detect the problem. The rework process could be changed to correct the problem, but the cost-benefit analysis for the suggested change indicates that it is not economically feasible. AccuSound's marketing analyst has indicated that this problem will have a significant impact on the company's reputation and customer satisfaction. Consequently, the board of directors would interpret this problem as having serious negative implications for the company's profitability. Khumalo included the circuit board failure and rework printed problem in her report prepared for the upcoming quarterly meeting of the board of directors. Due to the potential adverse economic impact. Khumalo followed a long-standing practice of highlighting this information. After reviewing the reports Chapter 1 The Crucial Role of Managerial Accounting in a Dynamic Business Environment to be presented, the plant manager and his staff complained to the controller that he should control his people betier. "We can't upset the board of directors with this kind of material, Tell Khumalo to tone that down. Maybe we ean get it by the board in this meeting and have some time to work on it. People who buy those cheap systems and play them that loud shouldo't expect them to last forever." The controller called Khumalo into his office and said, "Amahle you'll have to bury this one. The probable failure of reworks can be mentioned briefly in the oral presentation, but it should not be mentioned or highlighted in the advance material sent to the board." Khumalo feels strongly that the board of directors will be misinformed on a potentially serious loss of income if she follows the controller's orders. Khumalo discussed the problem with the quality control engineer, who simply remarked, "That's your problem, Amahle." Required: 1. Discuss the ethical considenations that Amahle Khumalo should recognize in deciding how to proceed. 2. Explain what ethical responsibilities should be accepted by (a) the controller, (b) the quality control engineer, and (c) the plant manager. 3. What should Khumalo do? Explain your
