Discuss The Ethical Issues Involved In This Scenario 294350

Discuss the ethical issues involved in this scenario

Evaluate the ethical considerations related to product costing and management behavior in the scenario involving Erin Jackson and Alan Tyler at Morelli Electric Motor Corporation. Discuss whether Erin Jackson is acting ethically in developing and reporting product costs for the deluxe electric motor, and whether Alan Tyler's request to alter or "massage" the numbers is ethically appropriate. Clarify Jackson’s ethical obligations to the company president and her friend, and analyze the potential consequences of unethical behavior in this context.

Paper For Above instruction

The scenario involving Erin Jackson, the controller at Morelli Electric Motor Corporation, presents a complex ethical dilemma centered around the accuracy of product costing data and the implications of manipulating such information. Jackson's responsibility is to provide precise, reliable financial data to inform managerial decision-making and stakeholder trust. Conversely, Alan Tyler’s request to manipulate or distort the reported costs for the deluxe model highlights significant ethical issues concerning honesty, integrity, and professional responsibility in accounting. This case underscores the importance of adhering to ethical standards in financial reporting, emphasizing transparency and truthfulness over short-term benefits or personal interests.

At the core of the ethical concern is the question of whether Erin Jackson is acting ethically by faithfully reporting the costs derived from activity-based costing (ABC). ABC provides a more accurate allocation of costs based on activities and resource consumption, which often reveals that low-volume products like the deluxe model are more costly to produce than traditional methods suggested. Jackson’s reporting indicates that the deluxe model is losing money, revealing potential profitability issues that management must address. Suppressing or altering these findings to please the production manager or to prevent potential discontinuation of the product conflicts with the fundamental ethical principles of honesty and transparency.

Alan Tyler’s request to “massage” the cost figures to make the deluxe model appear more profitable raises serious ethical concerns. Such actions constitute deliberate falsification of financial data, which breaches accepted accounting standards like those outlined by the American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct and generally accepted ethical principles. These standards emphasize integrity, objectivity, and independence, which prohibit intentionally misleading or deceptive financial reporting. Manipulating data, even at the request of a colleague who fears job loss or business decline, erodes stakeholder trust, damages the company's reputation, and can lead to legal consequences if discovered.

Erin Jackson’s ethical obligations extend to multiple stakeholders, including the company’s president, shareholders, employees, and her own professional reputation. Her primary responsibility is to provide accurate, unbiased financial information, enabling informed decision-making and ensuring compliance with legal and ethical standards. She also bears a fiduciary duty to act in the best interests of the organization by promoting honesty and integrity. Jackson’s duty to her friend, Alan Tyler, is secondary to her professional responsibilities. While understanding the pressures colleagues face is important, her allegiance must remain with truthful reporting rather than complying with unethical requests.

Furthermore, Jackson faces the challenge of balancing her loyalty to her friend with her ethical duties. Ignoring Tyler’s request aligns with ethical standards, but it also entails potential personal and professional risks. However, succumbing to pressure to falsify data could have far-reaching negative consequences, including legal penalties, loss of professional license, and harm to the company’s stakeholders.

In conclusion, Jackson’s ethical obligations fundamentally prioritize honesty, transparency, and adherence to professional standards. Acting ethically involves resisting pressures to manipulate financial data and instead reporting accurate costs based on activity-based costing. This approach supports sound decision-making, preserves stakeholder trust, and upholds the integrity of the accounting profession. Conversely, Tyler’s unethical request to alter the data compromises these values and could result in serious consequences for all parties involved. Ultimately, ethical conduct in financial reporting is vital for maintaining ethical standards, corporate accountability, and long-term organizational success.

References

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