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Ethics Challenge and Communicating in Practice - Essay Example

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Ethics Challenge and Communicating in Practice

Ethics Challenge 1. a) Why Atkins and Granger behave in this manner, and the expected benefits of budgetary slack A budgetary slack is a premeditated allowance for excess spending as overstated expenses or understated income (Stevens 1). Atkins and Granger make liberal use of this budget-making technique when making sales and expense projections. Budgetary slacks alleviate the effects of deviations if they occur. A more shifty use of the technique is to make it easier for managers to achieve targets, especially where sales performance results in bonuses and appraisals (Stevens 1). b) How budgetary slack can adversely affect Atkins and Granger Budgetary slacks in sales and expenditure projections can adversely affect the staff the projections relate. In the case of Atkins and Granger, altered projections can result in less motivation to achieve more in their areas of responsibility as they can alter the figures to give the impression that they are performing beyond the projections. On another note, if the two staff can alter the financial figures at will, then there is serious risk of the pair falsifying account figures to serve selfish interests (Stevens 1). 2. Why the use of budgetary slack may be unethical from IMAs Statement of Ethical Professional Practice perspective The Institute of Management Accountants (IMA) requires its members behave ethically, and in ways that are responsible, honest, fair, and objective (IMA 1). IMA categorically opposes the use of confidential information for unethical and illegal motives. Overall, management accountants should cultivate restraint in situations that pose conflicting interests. IMA also requires that management accountants evade activities such as the budgetary slack that may jeopardize efficient execution of some activities. A budgetary slack presents amble opportunities for information asymmetry (Stevens 1). For instance, Granger cannot tell with certainty the actual sales figures because Atkins changes them before handing them over. On credibility, the IMA expects that management accountants disclose all relevant information that may influence the understanding, and use of the information (IMA 2). Modification of sales figures by Atkins adversely affects the ability by Granger to predict closing inventory levels, which is clearly unethical. In addition, Atkins violates IMA’s stipulation that information communication should be fair and objective. The IMA proposes ways in which ethical dilemmas can reach amicable resolutions. One of the ways the institute suggests the involvement of higher management levels, audit committee, or the board of directors (IMA 2). Such measures can mitigate the tendency for the use of budgetary slack to achieve ulterior personal agendas resulting from the falsification of accounting information. Communications in Practice 1. On whether the administration should be ‘fair’ and institute a round of across-the-board cuts whenever the government announces a cut in the level of subsidies Educational institutions face waning monetary support from their key sponsors, the government. Waves of government budget cutting come with little warning because of policy change or because declining economic conditions (Maddox 1). Dealing with reduced budget is a repulsive management responsibility that involves difficult and sometimes drastic decisions, which cause wide-ranging dissent in vicinity of the management’ ...Show more


s Course 657 26 November 2011 Course Project 1: Ethics Challenge and Communicating in Practice Budgets put into perspective the future financial goals of a firm. Divergent views on budget-making process obfuscate budget-making process through ethical and communication in practice issues…
Author : ureichel
Ethics Challenge and Communicating in Practice essay example
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