Ethical Dilemmas in Cost Accounting: A Case Study of Plant Closure

This case study examines the ethical considerations involved when a controller, Steve Smith, is tasked with performing a cost analysis for a chocolate bar manufacturing plant slated for closure. Smith must navigate the confidentiality requirements and ethical obligations outlined by the IMA Statement of Ethical Practice. The analysis requires balancing the company's objectives with ethical responsibilities, ensuring competence, integrity, and credibility in reporting findings to the U.S. CFO, Roberta Blake. The case highlights the importance of adhering to ethical principles in cost accounting to ensure fair and transparent business decisions during significant organizational changes.

Running head: COST ACCOUNTING
Name of the Student
Name of the University
Author note

1: COST ACCOUNTING
Introduction:
Steve Smith has been hired as the controller for a chocolate bar manufacturing concern in the
United States. He directly reports to their United States CEO, Roberta Blake and along with this, he
also reports to the plant manager Rick White. Smith maintains an indirect reporting relationship with
Mr White. The CEO of US, Blake has forecasted that there will be significant amount of drop in the
manufacturing volumes of the company. The company intends to close down the plant operations of
in the next two years. It has also been decided that the current output would be produced in an
affiliated plant in the Czech Republic. Blake has instructed Smith with the responsibility of making a
cost analysis, which will serve as the basis for the closure of the plant. While doing so the company
expects Smith to maintain the high standards of confidentiality while preparing this report and along
with this it is also expected of Smith to keep in mind all the ethical obligations in accordance with the
IMA Statement of Ethical Practice.
Question 1:
Ethics plays an important part in ensuring the overall success of any business organisation. It
helps in taking correct decisions for the business, by taking into account the different
perspectives of all the stakeholders at large. The case of Smith and his company is not an
exception either. Mr Smith has to ensure that all the ethical considerations of the plant and its
business must be addressed. Conducting a cost analysis of the business is a very confidential
task due to its sheer nature (Grace & Cohen, 2015). It takes into account all the activities of
the company and analysis its costs, as a result of which, the report is confidential in nature.
According to the IMA’s Statement of Ethical Practice, the ethical principles consist of
Honesty, fairness, objectivity and responsibility and confidentiality imanet.org, 2018). The
principle of confidentiality is one of the most important ones. Smith has to follow the
provisions of confidentiality, which are as follows:

2: COST ACCOUNTING
 It must be ensured that all the information related to the cost analysis must be kept
confidential only except when disclosure is authorised or when it becomes legally necessary.
 It must also be ensured that all the relevant parties must be timely informed regarding the
judicial use of the confidential information. Continuous monitoring needs to be done to
ensure compliance (Joshua, 2013).
 One of the most imperative points to be kept in mind which is to ensure that, all the parties
must refrain from using confidential information for any kind of unethical or illegal activities.
Question 2:
Analysis of the objectives of the company is the most important task, as it has a direct
influence upon the functions of the entire organisation at large. In the case of Smith, he must ensure
that the objectives of the company must be analysed and if necessary, based on the findings of the
analysis report, can also be revised. Roberta Blake must be prepared for this, if the task of revising
the objectives of the company arises. One of the strongest elements which influence the objectives of
a company is the case of ethical consideration (Quinn, 2014). In the given case, the cost analysis must
take into account the ethical consideration and all the other principles of the IMA regarding the
reporting function. While reporting all the information about the analysis to Roberta, Smith must take
into account all the relevant provisions of the IMA, which are as follows:
 Competence: The professional is expected to perform his or her duties in accordance with the
different provisions and regulations. He or she must provide all kind of support in providing
information which are clear, concise and are accurate in nature (imanet.org, 2018).
 Integrity: It must be ensured that all the conflicts of interests must be resolved in an amicable
manner by regularly communicating with all the stakeholders and business associates. Mr
Smith must follow this while reporting the matters to Roberta.

3: COST ACCOUNTING
 Credibility: Mr Smith must clearly and fairly communicate all the necessary information to
the authorities, such as Roberta Blake in this case. Information must be credible, authentic
and accurate in nature.
Conclusion:
The report of cost analysis, by Smith to the authorities, must be performed with utmost care
and diligence. While performing this analysis and its subsequent reporting must be prepared keeping
in mind all the necessary principles of IMA statement of ethical practice. All the principles of
confidentiality, ethical consideration and credibility must be kept in mind while doing so. Only after
adhering to all these principles, proper reporting and analysis would be possible. Careful analysis
would lead to taking of important business decisions, which is why it must be ensured for the purpose
of preparation and reporting of the costing analysis.

4: COST ACCOUNTING
References:
(2018). Retrieved from https://www.imanet.org/career-resources/ethics-center?ssopc=1
(2018). Retrieved from https://www.imanet.org/insights-and-trends/business-leadership-and-ethics/
ima-statement-of-ethical-professional-practice?ssopc=1
Grace, D., & Cohen, S. (2015). Business ethics.
Joshua Atlas, C. M. A. (2013). Take a cost-benefit approach to ethics. Strategic Finance, 94(11), 51.
Quinn, M. J. (2014). Ethics for the information age. Boston, MA: Pearson.
Verschor, C. C. (2014). Is Business Ethics Getting Better or Worse. Strategic Finance, 95(11), 19-22.