Ethics Activity in Management Accounting

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Situation

Gina Hunter is an assistant controller at Premier Paperclips, a leader in the paperclip market. Premier Paperclips sells its products to office supply retailers nationwide. Premier’s sales representatives are paid on a commission basis and can earn significant bonuses for exceeding sales goals. Gina has heard of customer complaints of incorrectly filled orders. After some investigation, Gina learns that some of the sales representatives in the Dayton region are altering order forms to increase the quantities ordered by customers. When customers return the unordered items, Premier’s shipping and receiving department notifies accounts receivable to credit the customers’ accounts. The sales department is not notified of the returns, so no adjustment is made to the sales representatives’ order totals. As a result, the sales representatives are paid commissions on the returned items, and the returned items also count toward the sales goals. Gina is unsure if the sales manager for the Dayton region is aware of this practice. For all she knows, he may condone the practice so that his territory appears very productive. Gina is debating what she should do. She is considering confronting the sales representatives that seem to be creating the fraudulent sales, the sales manager of the Dayton region, the VP of sales, her boss (Premier’s controller), or a friend of hers on the company’s board of directors.

Gina’s ethical responsibility to take a course of action

Gina, as the assistant controller, has a great responsibility of ensuring that the company does not lose its customers due to the conduct of some greedy sales representatives. Although she might have known of the incident by chance, it is her responsibility to ensure that the reputation of the company is enhanced. She has an ethical responsibility to take a course of action as she has to make sure that the transactions in the company are carried out without fraud. This will be done if Gina cautions the sales representatives, sales department, and shipping and receiving department of mischievous behaviors. This will enable the managers to follow all the transactions of their specific departments to ensure that every action is performed correctly. Nevertheless, she should wait and see if any corrective action is done to solve for the failure before informing her boss about the fraudulent actions of the sales representatives.

Which sections of the IMA’s Code of Ethics presented on pages 23-24 are applicable in this situation

Section 3 of the IMA’s Code of Ethics is applicable in this situation as it affirms that every member should desist from taking part in any activity that could persist in undertaking ethical actions (Lanen 23-24). In this regard, the employees of a company should be honest by supporting the organizational objectives. Therefore, the sales representatives of Premier Paperclips should work towards improving the reputation of the company but not towards violating the rules by trying to earn money through fraudulent means. The sales representatives wronged their customers and managers. They went against the IMA’s Code of Ethics by having engaged in corrupt deals and given misleading information. In that manner, the sales representatives cannot be considered to be committed to the company’s rules and objectives. They went against the professional ethics of business with the purpose of having gained more commissions illegally.

What course of action should Gina take, and why?

Although the sales manager may not be aware of this unethical behavior, Gina should convene a meeting of all the sales representatives and warn them about their unethical conduct. She should specifically mention the Dayton region, which was most affected. She should also caution all the sales representatives from other regions so that they do not adopt such behavior. Moreover, Gina should alert the sales department about what is happening among the sales representatives so that they take necessary measures to ensure that all the orders and returns are true. She should give a word of advice to the sales representatives on the importance of abiding by the ethical codes of behavior. She should enlighten them on the different ethical behaviors and how they are important to both the employees and the customers of the company. Failure to adhere to ethical behaviors could lead to the collapse of the company or to the corrupt employees to be losing their jobs. As an assistant controller of Premier Paperclips, she should come up with strict rules that the employees of the company, especially those in the sales department, should adhere to. Failure to abide by the rules should lead to an employee being either / both fired or / and at times called upon to compensate the company for any loss caused.

Works Cited

Lanen, William, Shannon Anderson, and Michael Maher. Fundamentals of Cost Accounting. 4th ed. New York City: McGraw-Hill/Irwin, 2013. Print.

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Ethics Activity in Management Accounting

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