High School

Please answer the case using your best ethical judgment and knowledge of accounting standards for revenue recognition.

Structured questions for the case write-up include:

1. Does Sarah have all of the facts? What accounting standards and ethical guidelines are available to her?

2. Why does she feel pressured? How do the virtues compete to make this decision difficult?

3. What are her alternatives and the consequences?

4. What do the rules say? Specifically research and address IMA's Statement of Ethical Professional Practice as a guide to your answer.

5. Which overarching virtues are most important in this decision?

6. What are the possible steps to resolve the problem?

**Case Narrative: Virtues in Conflict**

Sarah Grant is the CFO of Frame Tec, Inc., a large regional construction contractor with approximately 300 employees. The owners are exceptionally kind and intelligent carpenters who worked their way up in the business world through hard work and solid ethics. Sarah has enjoyed working with them for more than 10 years. They have accepted her as an essential part of the upper management team, and they rely on her judgment.

Sarah and the upper management team had a rough stretch about a year ago. Against Sarah's strongest recommendations, the owners decided to buy lumber directly from lumber mills and hired Jack Jones, a lumber professional, to handle the purchasing. Prior to this, Frame Tec utilized the services of resellers. Resellers usually provide fixed bids for lumber pricing when a project is estimated. They hold their prices and normally bear the risk for changing market conditions. Sarah was very concerned that the company was taking an unnecessary risk by losing this security.

Answer :

Does Sarah have all of the facts? What accounting standards and ethical guidelines are available to her?

Sarah should gather all the relevant facts and information regarding the lumber purchasing decision and its impact on financial reporting. Accounting standards, such as the Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), provide guidelines for revenue recognition, disclosure, and financial reporting. Ethical guidelines, such as the IMA's Statement of Ethical Professional Practice, can offer guidance on maintaining integrity, objectivity, and confidentiality in financial decision-making.

Why does she feel pressured? How do the virtues compete to make this decision difficult?

Sarah may feel pressured due to conflicting interests and priorities. On one hand, the owners' decision to buy lumber directly may be driven by cost-saving objectives. On the other hand, Sarah's concerns about potential risks and adherence to ethical principles may create tension. The virtues of integrity, honesty, and accountability may compete with the virtue of loyalty towards the owners.

What are her alternatives and the consequences?

Sarah could consider various alternatives, such as discussing her concerns with the owners and presenting alternative solutions, seeking advice from external experts or industry professionals, or involving the company's audit committee or board of directors. The consequences of each alternative should be carefully evaluated, including potential impacts on financial reporting, relationships with the owners, and the company's reputation.

What do the rules say? Specifically research and address IMA's Statement of Ethical Professional Practice as a guide to your answer.

The IMA's Statement of Ethical Professional Practice outlines principles and standards for management accountants, including competence, confidentiality, integrity, and objectivity. Sarah should review the relevant sections of the statement related to professional behavior, conflicts of interest, and ethical responsibilities. This can provide guidance on how to approach the situation and make decisions in line with ethical standards.

Which overarching virtues are most important in this decision?

The most important virtues in this decision may vary depending on the specific circumstances and values of the organization. However, virtues such as integrity, honesty, transparency, and accountability are likely to be critical in ensuring accurate financial reporting, maintaining trust, and upholding ethical principles.

What are the possible steps to resolve the problem?

Possible steps to resolve the problem could include open and honest communication with the owners, providing a thorough analysis of the risks and benefits associated with the lumber purchasing decision, seeking external advice, considering alternative solutions, and engaging relevant stakeholders, such as the audit committee or board of directors. The aim should be to find a balanced approach that addresses both cost-saving objectives and adherence to ethical and accounting standards

Learn more about accounting standards here: brainly.com/question/32717552

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