Question

Continental Condiments is a large food products firm in Pa. Its sales staff has a strong incentive plan tied to meeting 1/4ly budgets. On 6/25, Maria Tuzzi, a divisional controller, learns that some of the sales staff asked customers to take delivery of sizable quantities of products before 6/30. The customers were told they could return the products after 7/1 if they determined the items weren’t need. (This is “channel stuffing.”) The sales staff also offered to reimburse the customers for any storage costs incurred.

1. From the viewpoint of the IMA’s “Statement of Ethical Professional Practice” what are Maria’s responsibilities? (List each standard and briefly discuss how it applies to Maria’s responsibilities in this case.)
2. What steps should Maria take to resolve this problem?

Answer 1

Statement of Ethical Professional Practice issued by Institute of Management Accounts is one of the largest and respected associations focused exclusively on advancing the management accounting profession. The Ethical principles include: Honesty, Fairness, Objectivity, and Responsibility.

Moreover there are four standards from the viewpoint of the IMA’s “Statement of Ethical Professional Practice” which are

· Competence

· Confidentiality

· Integrity

· Credibility.

The above standards can be applied to Maria’s responsibilities in this case as follows:-

1. Competence:-

Competence is the ability to provide decision support information and recommendations that are accurate to the situation, clear to understand, concise in nature, and in timely manner. Maria being the divisional head should be completent enough to face the issue and provide with a precise and timely solution for the problem that has to be faced by the customers on accounts of mismanagement by the sales team.

2. Confidentiality:-

Confidentiality refers to keep things secret except when disclosure is authorized or legally required. In this case the sales team in order to get bonus didn’t reveal the actual nature of sales carried out by them and misguided the organisation to achieve quarterly targets which can be seen as an act of misconduct. Such information should be refrained from being kept confidential by the team and should be conveyed.

3. Integrity:-

Integrity is the most important thing for a business to retain customers and progress. Organisation should try avoid conflict of interest in order to maintain its integrity with the clients. In this case the sales team in order to get bonus, the sales team lead the integrity of the organisation to fall by over selling the goods to the customers which could later be returned which would burden the customers for which they may get upset with the organisation at a later stage.

4. Credibility:

Credibility is the act of communicate information fairly and objectively. It is like keeping someone accountable for its action or deeds. An atmosphere of credibility should be maintained where the reporting of such actions are done intently to the superiors so corrective measures can be taken instantaneously.

B. Steps that should be taken by Maria to resolve this problem would involve judgement and professional behaviour. In these situations, the member should not ignore them, but rather should seek to resolve the issue.

· Maria can implement strict screening procedure to penalise any such act which is unhealthy to the organisation.

· The incentive policy should be revised to take into consideration the goods return by the customer after the period to be deducted while paying the incentives.

· The customers should be apologised to in case of any hardships been faced by them and to ensure that such a act is not repeated.