Demetillo, Angel Marie

Emnace, Cheveem Grace

Nepomuceno, Jenica Chloe
MANACC330 – C08

Exercise 1-4
Richmond, Inc., operates a chain of 44 department stores. Two years ago, the board of direc- tors
of Richmond approved a large-scale remodeling of its stores to attract a more upscale clientele.
Before finalizing these plans, two stores were remodeled as a test. Linda Perlman, assistant
controller, was asked to oversee the financial reporting for these test stores, and she and other
management personnel were offered bonuses based on the sales growth and profitability of these
stores. While completing the financial reports, Perlman discovered a sizable inventory of
outdated goods that should have been discounted for sale or returned to the manufacturer. She
discussed the situation with her management colleagues; the consensus was to ignore reporting
this inventory as obsolete because reporting it would diminish the financial results and their
bonuses
Required:
1. According to the IMA's Statement of Ethical Professional Practice, would it be
ethical for Perlman not to report the inventory as obsolete?
No, because not reporting the inventory as obsolete would be unethical for
Perlman as she would be violating the IMA’s Statement of Ethical Professional Practice.
One of overarching ethical principles of IMA includes honesty which is to be truthful and
Perlman, as a member of IMA should adhere to this principle and she should encourage
others to adhere to the principles as well. Moreover, not reporting the inventory as
obsolete will also be a violation of the standard. First is competence. The standard stated
that each member has a responsibility to provide decision support information that are
accurate. Second is integrity. Each member should mitigate actual conflicts of interest.
According to the standard, each member should refrain from engaging in any conduct
that would prejudice carrying out duties ethically. Not reporting the inventory as obsolete
to increase sales and profitability is a conflict of interest since Perlman and the other
management personnel would receive a bonus based on these factors. Lastly, credibility
will also be violated. The standard stated that each member has to disclose all relevant
information that could reasonably be expected to influence an intended user’s
understanding of the reports, analyses, or recommendations. Furthermore, each member
is also responsible for disclosing any deficiencies in information in conformance with
organization policy and applicable law. In conclusion, Perlman should disclose the
information with regard to the obsolete inventory because hiding it is not only unethical,
but it also impairs the objectivity and relevance of the financial statements.

2. Would it be easy for Perlman to take the ethical action in this situation?
 As per instructed was to disregard reporting this inventory as obsolete because
doing so would reduce financial results and severely characterize members of
management as inept for not properly supervising operations. Furthermore, this is also a
matter with which conflict of interest can be obviously seen, since that Perlman and other
management personnel’s bonuses heavily rely on the store’s performance on sales and its
profitability. As a result, taking ethical action in this situation would be difficult. If
Perlman has the courage to report such outdated inventory, this would not only anger her
colleagues but also affect her own incentives. Nevertheless, as managers they must
prioritize the interest of the company’s stockholder’s rather than the interests of the
management.

Exercise 1-9
Assume that you are the chairman of the Department of Accountancy at Mountain State Uni-
versity. One of the accounting professors in your department, Dr. Candler, has been consistently
and uniformly regarded by students as an awful teacher for more than 10 years. Other accounting
professors within your department have observed Dr. Candler's classroom teaching and they con
cur that his teaching skills are very poor. However, Dr. Candler was granted tenure 12 years ago,
thereby ensuring him life-long job security at Mountain State University.
Much to your surprise, today you received a phone from an accounting professor at Oregon
Coastal University. During this phone call you are informed that Oregon Coastal University is on
the verge of making a job offer to Dr. Candler. However, before extending the job offer, the
faculty at Oregon Coastal wants your input regarding Dr. Candler's teaching effectiveness while
at Mountain State University.
Required:
How would you respond to the professor from Oregon Coastal University? What
would you say about Dr. Candler's teaching ability? Would you describe your answer to
this inquiry as being ethical? Why?
It is an honor and privilege to know that one of the department’s professors, Dr. Candler,
has been offered a position at your esteemed academe. As the Chairman of the Department of
Accountancy at Mountain State University, I'd want to let you know that Dr. Candler is
committed and enthusiastic about his/her responsibilities and duties as a teacher. For a very long
time that I have worked with the him/her, Dr. Candler has demonstrated his adaptability and
capacity to work under pressure. However, despite of his good characters, Dr. Candler’s teaching
abilities has been criticized of the students as well as the faculty as to their observations in his
ten-year of teaching. Rest assured that I will communicate to Dr. Candler to address these
concerns and to have a solution for it.
I would describe my answer to this inquiry as being ethical. To be ethical you need to
have good characters such as being honest, fair, responsible, and have accurate information.
Disclosing the abilities of Dr. Candler to the accounting Professor at Oregon Coastal University
will also reflect to the future of the students, giving non-factual information and characteristics
of Dr. Candler just to lift up his image would be unethical and may give harm to the quality of
education of the university. It is my responsibility to be honest regarding to the real behavior of
Dr. Candler so I can help with the decision of the Oregon Coastal University.