Question

In: Accounting

Ethics and casual conversations: Jane is an accountant at Merelix, a large international firm where she...

Ethics and casual conversations:

Jane is an accountant at Merelix, a large international firm where she works on potential acquisitions. When Merelix is preparing to acquire a company, Jane is involved in filing the necessary paperwork with the Securities and Exchange Commission (SEC).

Jane has been dating Tom for two years; they are now discussing marriage. Tom works as a salesperson for a golf equipment distributor.

Over the past two years, Jane has talked with Tom about what she’s doing at work. She does not go into great detail, but does occasionally mention company names. Jane has given her phone passcode to Tom so he can answer calls for her or look things up for her when she’s the one driving. Tom has read some of her emails by using the phone passcode. He has also eavesdropped on a few phone conversations she has had when a colleague calls her from work with a question.

Unbeknownst to Jane, Tom has been sharing the information he has gotten from her with his stockbroker friend, Allen. Tom will call Allen to give him a “heads up” that Jane’s company is going to be acquiring another company soon. Allen will then place an order to buy the stock of the company and will later split the profits with Tom.

Jane has not shared any information intentionally, nor has she directly profited from it.

Requirements:

Using the IMA Statement of Ethical Professional Practice (refer to Exhibit 1-7 pg.13 of the textbook) as an ethical framework, answer the following questions:


What is (are) the ethical issue(s) in this situation?


What are Jane’s responsibilities as a management accountant?


Has Jane violated any part of the IMA Statement of Ethical Professional Practice? Support your answer.


Solutions

Expert Solution

> What is (are) the ethical issue(s) in this situation?

A Management accountant analyze and report on financial information to help companies make operating decisions. IIf someone choose this career, he/she has to be certified management accountant, or CMA, certification. This comes with some responsibility, as he/she has to follow the IMA's code of conduct. or statement of ethical professional prectices. The IMA's statement of ethical professional practice has four principles: honesty, fairness, objectivity and responsibility. To maintain these principles, you'll follow four standards in your everyday life as a management accountant. These are competence, confidentiality, integrity and credibility. According to the IMA, failing to work to these standards may result in disciplinary action, so it's important to get these right. With respect of maintainig confidentiality, which is the ethical issue relating to given situation are as follows:

  1. Keep information confidential except when disclosure is authorized or legally required.

  2. Inform all relevant parties regarding appropriate use of confidential information. Monitor subordinates' activities to ensure compliance.

  3. Refrain from using confidential information for unethical or illegal advantage.

>  What are Jane’s responsibilities as a management accountant?

The relationship between Jane and her client is as fiduciary one, which means she has a responsibility to act for the client's benefit. As a management accountant, she is require  to work with confidential and potentially sensitive business data or information that may not be in the public domain. She should keep all information confidential, unless she is told to share it or have a legal requirement to do so. It's also part of herjob to make sure that other people understand what they can and cannot do with this information, and she shouldn't use it to gain an illegal or unethical advantage. She is obligated to protect this information from unauthorized disclosure or public release intentionally or unintentionally. Because accountants comply with the confidentiality principle, clients feel free to speak frankly and reveal relevant facts regarding accounting issues, enabling the accountant to act in the client's best interest.

> Has Jane violated any part of the IMA Statement of Ethical Professional Practice?

It's important that no confidential information is used directly by the accountant or indirectly by a third party for unethical or illegal purposes. Preventing such acts preserves the trust between the client and the accountant. In addition, maintaining the confidentiality of client records meets the accountant's duty of confidentiality in regards to data received as a result of a business relationship. Such protections help to ensure the accountant will not be sued by a client due to a breach of duty and that the accountant's reputation will not be damaged due to a failure to safeguard confidential information.

In the given situation Jane, knowingly that her phone contain such information regarding her client , give it her boyfriend who has gathered information about her client and subsequenlly use thosw information for his personal benefits. Though Jane has not done any thing intentionally but it was her responsibilty to secure the information of her client. Though her boyfriend has cheat her but it was ulmatley her responsibilty to maintain the confidentiality.

So she should be held liable for unprofessional  behavior and shall held liable for professional misconduct and dicipilinary action should be taken against her.


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