Your boss went to an accounting seminar and learned about the Institute of Management Accountants Statement of Ethical Professional Practice. He has called a meeting of; a fresh from college accounting hire, the new manager of the accounting department, and you (Finance Director). It seems that the prior manager of the accounting department manipulated the operating results by assigning some of the direct costs of manufacturing to the non-controllable fixed cost category. Therefore, the financial ratios presented a false picture of operations. It looked like everything was running effectively and efficiently it was not. Upon discovery of this intentional misclassification of costs (to reach the target profits that support the bonus program), the prior accounting department manager was fired without notice.

Your boss expects you to present this event to your fellow participants for discussion. He wants to know if they agree with the immediate firing of the manager. Include in your write-up:

1. A brief description of the problem using the variables outlined in the assigned article..

2. An explanation of the applicable section of the IMAs Statement of Ethical Professional Practice.

3. Summarize what you think the new hire will say about the firing and why you think he/she took that position.

4. Summarize what you think the new manager will say about the firing and why you think he/she took that position.

5. Any other information you deem important.

6. A brief summary or conclusion.

Article:

Shafer, W. E. (2015). Ethical climate, social responsibility, and earnings management, Journal of Business Ethics, 126, 43-60.