Question

Harriet Moore is an accountant for New World Pharmaceuticals. Her duties include tracking research and development spending in the new product development division. Over the course of the past six months, Harriet has noticed that a great deal of funds have been spent on a particular project for a new drug. She hears “through the grapevine” that the company is about to patent the drug and expects it to be a major advance in antibiotics. Harriet believes that this new drug will greatly improve company performance and will cause the company’s stock to increase in value. Harriet decides to purchase shares of New World in order to benefit from this expected increase.

Required:

Identify ethical dilemmas Harriet faces, if any, with respect to the information she has learned through her duties as an accountant for New World Pharmaceuticals. What are the implications of her planned purchase of New World shares?

Answer 1

Answer:-

1) Accountants should act independently for the good of the company and its shareholder. His motive is to give a true and fair view of the company to its shareholders. He should not indulge in any fraudulent activity or in any activity for personal gains. He should neither have any financial interest in the company. Independence is a must. Moreover, if the company asks Harriet Moore to do something wrong he should deny the same. Neither he should indulge in fraud nor allow the company or any other person related to indulging in such activities.

2) In the given case Harriet tries to take undue advantage from the internal source and knowledge to purchase shares of the company. Harriet is anticipating a jump in the market price, and would likely sell her shares to make a great deal of money. I do not believe she would invest in the shares if she did not think that the new drug was going to be a huge hit. If Harriet was not a key employee in the company, she would not be doing anything wrong. However, she knows how much has been spent on this drug and that the grapevine statement is likely correct.