You are on page 1of 2

Senior Security Co. offers a range of security services for senior citizens.

Each type of service is considered within a separate department. Mary Pincus, the overall manager, is compensated partly on the basis of departmental performance by staying within the quarterly cost budget. She often revises operations to make sure departments stay within budget. Says Pincus, “I will not go over budget even if it means slightly compromising the level and quality of service. These are minor compromises that don’t significantly affect my clients, at least in the short term.” Required 1. Is there an ethical concern in this situation? If so, which parties are affected? Explain. 2. Can Mary Pincus take action to eliminate or reduce any ethical concerns? Explain. 3. What is Senior Security’s ethical responsibility in offering professional services?

The ethical concern in this situation is that quality and level of service may be sacrificed in order to control costs. The parties most affected by lower levels of quality and service are the clients. Senior Security Co appears to be primarily using a responsibility accounting system to measure manager performance. As such, Ms. Pincus is evaluated by her ability to operate within a responsibility accounting budget that sets objectives based on costs that are controllable by the manager (Wild, 2011). Responsibility accounting systems focus on the goals of individual organizational units. Meeting these goals does not guarantee any level or quality of service. Meanwhile, a process-oriented accounting system measures the outputs of cross-departmental work processes relative to quality and level of service (Chow, 10). If performance is based solely on a responsibility accounting system with no other “balanced scorecard” types of objectives, Ms. Pincus is not ethically or in any other way bound to ensure any quality or level of service. While it may be unfortunate that service level and quality are sacrificed to meet operating budgets, I would not go so far as to say that Ms. Pincus is acting unethically. The responsibility for setting the tone for ethical responsibility lies with the company, its values and its policies. One way for the company to promote ethical responsibility (or any nonfinancial goal, for that matter) is to include a “balanced scorecard” approach to measure management performance (Wild, 874). Quality and level of service would correlate with the customer perspective of the “balanced scorecard.”

Issues in Accounting Education. (2011).References: Fundamental Accounting Principles. 10. John J. Boston: Houghton Mifflin Company. 1. No. (1995). K. . Wild. Vol.W. Chee Chow. New York: McGraw-Hill Irwin.