Question

 4. Matt Cameron is a Certified Management Accountant (CMA) and a member of the Institute of Management Accountants (IMA). As such, he is subject to the IMA Statement of Ethical Professional Practice. Advise Matt on whether he would be in violation of the Statement of Ethical Professional Practice if he agrees to engage in eamings management. If Matt determines that managing eamings is unethical, but the rest of the management team is determined to engage in these activities, advise Matt on how he should attempt to resolve this ethical conflict, referring specifically to the IMA Statement of Ethical Professional Practice.

 5. Stefanie Weiss is a Certified Public Accountant (CPA) and a member of the American Institute of Certified Public Accountants (AICPA). As such, she is subject to the AICPA Code of Professional Conduct. Advise Stefanie on whether she would be in violation of the Code of Professional Conduct if she agrees to engage in earnings management. If Stefanie determines that managing earnings is unethical, but the rest of the management team is determined to engage in these activities, advise Stefanie on how she should attempt to resolve this ethical conflict, referring specifically to the Code of Professional Conduct.

Answer 1

(4): Yes, Matt would be in violation of the Statement of Ethical Professional Practice if he agrees to engage in earnings management. The elements of the standards are competence, confidentiality, integrity and credibility. By engaging in earnings management Matt would be engaging in an activity that would prejudice carrying out duties ethically. Integrity of the profession would be compromised and most importantly the financial information will not be communicated in a fair and objective manner.

To resolve the ethical conflict Matt should discuss the issue with his immediate supervisor. If the supervisor is involved too then Matt should present the issue to the next level of management. Even if resolution is not reached then Matt can act as a whistleblower and/or withdraw from her role after properly documenting all issues and all steps taken by her.

(5): As per AICPA’s Code of Professional Conduct Stefanie would be in violation of the code by engaging in earnings management. This is because the code specifies that “members should perform all professional responsibilities with the highest sense of integrity”. As per the standard of integrity Stefanie should ask if her action of earnings management would lead her to retaining her personal and professional integrity or not, if it will violate the spirit of technical and ethical standards. The answer will be yes. Also her actions of earnings management would not represent a true and fair financial position and this against the AICP’s code.

To resolve the conflict Stefanie should recognize and consider all relevant facts and circumstances, including applicable rules, laws or regulations. She should then consider the ethical issue involved and consider established internal procedures. Lastly she should formulate alternative courses of action. She should then select the course that best enables compliance with the rules. Even after following the above the ethical issue is not resolved then Stefanie should consider withdrawing from her assignment or employment position.