CIA Part 1 & CMA Part 2 students:Essaybased Question ⁉️ Ethical Dilema

 Today's essay based questions ‼️ Topic..How to tackle Ethical issues/Dilemma in a organization

_Purchase Department_

1. Case Study:

Rahul, a purchase manager at a manufacturing company, is responsible for procuring raw materials. One day, he receives a bribe offer from a supplier in exchange for awarding them a contract. What should Rahul do?

A) Accept the bribe and award the contract

B) Reject the bribe and award the contract to another supplier

C) Report the incident to his supervisor

D) Ignore the incident and continue with the procurement process

Answer: 

1. Case Study:

A purchase department employee, Rohan, discovers that a supplier has been overcharging the company for raw materials. However, the supplier has been providing Rohan with personal gifts and favors. What should Rohan do?

A) Ignore the overcharging and continue accepting gifts and favors

B) Report the overcharging to his supervisor and return the gifts and favors

C) Confront the supplier and demand a refund

D) Resign from the company to avoid conflict

Answer

_Payroll Department_

1. Case Study:

A payroll department employee, Priya, discovers that an employee has been misrepresenting their work hours to receive extra pay. What should Priya do?

A) Ignore the issue and continue processing the employee's payroll

B) Report the issue to her supervisor and recommend disciplinary action

C) Confront the employee and demand repayment of the excess amount

D) Resign from the company to avoid conflict

Answer: 

1. Case Study:

A payroll department employee, Raj, is responsible for processing employee salaries. However, he discovers that the company is not paying its employees the minimum wage required by law. What should Raj do?

A) Ignore the issue and continue processing employee salaries

B) Report the issue to his supervisor and recommend corrective action

C) Confront the management and demand immediate correction

D) Resign from the company to avoid conflict

Answer:

_Human Resource Department_

1. Case Study:

A human resource department employee, Ramesh, discovers that an employee has been harassed by a colleague. However, the employee is hesitant to report the incident due to fear of retaliation. What should Ramesh do?

A) Ignore the issue and advise the employee to resolve it on their own

B) Report the issue to his supervisor and recommend disciplinary action against the harasser

C) Counsel the employee and provide support, but do not report the incident

D) Resign from the company to avoid conflict

Answer: 

1. Case Study:

A human resource department employee, Suresh, discovers that an employee has been misrepresenting their qualifications and experience on their resume. What should Suresh do?

A) Ignore the issue and continue employing the individual

B) Report the issue to his supervisor and recommend disciplinary action

C) Confront the employee and demand correction of their resume

D) Resign from the company to avoid conflict

Answer:

_Production Department_

1. Case Study:

A production department employee, Kumar, discovers that a machine is not functioning properly and is producing defective products. However, the production manager is pressuring him to meet the production targets and ignore the issue. What should Kumar do?

A) Ignore the issue and continue producing products

B) Report the issue to his supervisor and recommend corrective action

C) Confront the production manager and refuse to continue producing defective products

D) Resign from the company to avoid conflict

Answer:

1. Case Study:

A production department employee, Ravi, discovers that a colleague is not following safety protocols and is putting themselves and others at risk. What should Ravi do?

A) Ignore the issue and continue working

B) Report the issue to his supervisor and recommend corrective action

C) Confront the colleague and demand that they follow safety protocols

D) Resign from the company to avoid conflict

Answer: 

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_Senior Management Level_

1. Case Study:

The CEO of a company, Mr. Sharma, is considering a proposal to acquire a rival company. However, he has a personal relationship with the CEO of the rival company and stands to gain financially from the acquisition. What should Mr. Sharma do?

A) Approve the acquisition proposal without disclosing his personal relationship

B) Recuse himself from the decision-making process due to conflict of interest

C) Disclose his personal relationship to the board of directors and seek their approval

D) Reject the acquisition proposal due to potential conflict of interest

Answer:

1. Case Study:

The CFO of a company, Ms. Rao, discovers that the company's financial statements contain material errors that could mislead investors. However, the CEO is pressuring her to release the financial statements without correcting the errors. What should Ms. Rao do?

A) Release the financial statements without correcting the errors

B) Refuse to release the financial statements until the errors are corrected

C) Report the issue to the audit committee and seek their guidance

D) Resign from the company to avoid conflict

Answer: 

_Board of Directors_

1. Case Study:

The board of directors of a company is considering a proposal to pay a large bonus to the CEO, despite the company's poor financial performance. What should the board do?

A) Approve the bonus payment without questioning the CEO's performance

B) Reject the bonus payment due to the company's poor financial performance

C) Request additional information about the CEO's performance and the company's financial situation before making a decision

D) Delegate the decision to the compensation committee

Answer:

1. Case Study:

The board of directors of a company discovers that the CEO has been engaging in insider trading. What should the board do?

A) Terminate the CEO's employment contract immediately

B) Conduct an investigation into the CEO's activities before taking any action

C) Request the CEO to resign voluntarily

D) Take no action and allow the CEO to continue serving

Answer:

_Audit Committee_

1. Case Study:

The audit committee of a company discovers that the company's financial statements contain material errors that could mislead investors. What should the audit committee do?

A) Request the management to correct the errors and reissue the financial statements

B) Conduct an investigation into the causes of the errors

C) Report the issue to the board of directors and seek their guidance

D) Take no action and allow the financial statements to remain unchanged

Answer: 

1. Case Study:

The audit committee of a company receives a whistleblower complaint alleging that the company's management has been engaging in fraudulent activities. What should the audit committee do?

A) Conduct an investigation into the allegations immediately

B) Report the issue to the board of directors and seek their guidance

C) Request the management to investigate the allegations and report back to the audit committee

D) Take no action and dismiss the whistleblower complaint as unfounded

Answer: 

Please solve & submit your answers

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Frameworks for tackling ethical dilemmas and evaluating the ethical considerations

If an organisation’s senior managers need to make strategic choices so that it can reach its targets, they will require control systems to guide it towards the intended destination. The risks that the organisation will face on that journey are numerous. A variety of control systems can be used to reduce those risks to an acceptable level, if not eliminate them. 

They include HR controls, whereby employees are properly trained and motivated to do the right things. They also include mission statements and corporate cultures and management styles. A  company’s internal code of conduct is another critical control system, but students must also understand the role of ethical codes in the management accountancy profession and how to use them to deal with the kinds of ethical dilemmas that many of them will inevitably face in their work.

There has been much academic discussion on how to formulate an ethical approach to solving such problems. This suggests that, if you want to determine whether a proposed course of action is ethical

or not, ask yourself how you’d feel if it were reported on the front page of this newspaper and became public knowledge. Would it cause you any embarrassment? Would it embarrass your employer or client, your family or friends, your fellow  professionals or the wider accounting community? If you think

it would, it may be that the plan is not ethical and needs to be reconsidered . Other useful frameworks include the “virtue test” (how would a virtuous person whom I look up to react in my situation?) and the so-called Biblical golden rule: do unto others as you would have them do unto you. Of particular relevance to management accountants is the social contract theory – ie, that accountants have a contract with society – given the emphasis that IFAC’s and CMA’s codes of ethics place on the duty of accountants to serve the public interest first and foremost. Again, this can be useful while assessing options in an ethical dilemma. When faced with any question on ethics, candidates should appreciate that any actions proposed to solve a dilemma must accord with the five fundamental principles laid down by CMA for the ethical conduct of its members and students. The principles – integrity, objectivity, confidentiality, professional behaviour and professional competence, and due care – are drawn from the IFAC code of ethics, which all accountancy bodies affiliated to IFAC use as the basis for their codes. An overall approach should first ensure that the solution is legal, bearing in mind all relevant regulations. Second, it should be in line with CMA’s fundamental ethical principles.

What is ethics?

Ethics is concerned with what society considers to be right or wrong. It therefore relates to standards of behaviour. At first this may appear to overlap with one purpose of law, in that law seeks to address behaviour of which society disapproves. However, ethical principles may be adopted that discourage behaviour that is undesirable but legal. For example, during the expenses scandal that arose in the UK in 2009 regarding claims for reimbursement by politicians, one politician responded to criticism by stating that she had done nothing illegal. This rather missed the point, as the general public may still regard legitimate expenses claims as inappropriate, and therefore unethical.

Ethics lacks the certainty usually provided by the law, as individuals may consider some things that are legal to be unethical. In turn, views on morality differ, so even when ethical principles are codified by professional bodies or commercial organisations, they may be regarded differently according to the moral principles of each individual.

Corporate codes of ethics

Corporate codes of ethics are published by private sector organisations in order to communicate their values and beliefs to stakeholders. These include:

• customers, whose buying decisions may be influenced by ethical considerations
• shareholders, whose investment decisions may be influenced by ethical factors
• employees, who have to know the standards expected of them
• suppliers, who need to understand the expectations of their customers and also that they will be treated ethically during the course of the commercial relationship
• lobby groups, who may have specific interests in certain practices of the organisation
• the community in which the organisation is situated, which may seek reassurance that the organisation will act in its interest as an employer and as a good ‘corporate citizen’.

• Conflicts of interest arise from various sources. The accountant may be asked to:

  • take a decision on a matter in which the individual has a personal involvement, such as where the accountant has a family or personal relationship with the client
  • advise a company that is in direct competition with an existing client
  • support two clients who are in competition with one another.

  • Ethical dilemmas arise when the accountant has to consider two or more seemingly incompatible ethical obligations. For example:

    • he may be asked by a manager to remain silent about certain matters that would have an adverse impact on the financial accounts of an organisation, thereby testing the accountant’s loyalty to his manager on the one hand, and his responsibilities as a professional accountant on the other
    • he may consider that the policies of his employer are unethical and may find it difficult to reconcile personal values with those of the organisation
    • he may be advising a long-standing client who is also a personal friend, only to discover that one of the client’s family is behaving dishonestly, thereby playing the bond of friendship against the professional duty to give objective, truthful advice.
    • 
      

My suggested approach to answering questions on ethics comprises the following five steps:

1. Analyse the situation. Most ethics questions are presented as “A asks B to do C, which is in breach of D”. B will probably be you or someone who has come to you for advice and A will probably

be a senior manager or boss. You can take it that D is your institute’s ethical principles or some similar code of conduct that B should follow. As accountants, our codes of ethics always take precedence

over any corporate code that might apply to our status as an employee. There shouldn’t be a clash, but our professional codes come first if there is one.

2. Identify the ethical principles involved. Your main reference guide should be the code that governs your conduct as a CMA student and, hopefully, a future member. Most scenarios will cover a number of

ethical principles. Typically, these will involve confidentiality (are you being asked to disclose client information?), integrity (are you being asked to give false or misleading information?) or objectivity (are you under economic pressure from your boss or personal pressure from a friend or relative?)

3.  Identify the available courses of action. There will usually be more than one. Think widely – the more points you can make, the more marks you can earn, as long as your suggestions are practical.

4. Analyse the consequences of each option. Think clearly and logically about what the outcomes would be if you were to make the choices you have identified.

5.  Make your recommendation. If a report is called for, provide one. Even if it’s not specifically required, the report format can be a useful way to present your answer. And always remember the other golden rule: never recommend anything that will break the law or any of the fundamental

principles of CMA’s code of ethics

The IFAC Code offers a framework through which ethical dilemmas may be addressed.  When faced with ethical conflicts, the decision taker should consider:

• the facts of the situation
• the ethical principles involved
• related fundamental principles
• relevant internal procedures
• the alternative courses of action
• consequences of each alternative course of action.

• Conclusions

  Ethics is not an easy subject but one that has become critically important in a business environment in which failure to adhere to proper standards can have a devastating effect on organisations, investors, suppliers, employees and, of course, customers. Looking back over the past 25 years, there have been several high-profile corporate scandals that have all involved the human ethical failings to some degree. They include Enron and WorldCom in the US, Parmalat in Italy and Maxwell Communications, Polly Peck and Barings Bank in the UK. Arguably, the revolution in information communications technology has meant that more people know about these issues, and more quickly than ever before, and that such events are nothing new. Perhaps this is one of the very reasons why professions must constantly reaffirm their commitment to ethical values and high standards of moral behaviour.