Suppose you are controller of a medium-sized oil exploration company in western Texas. You adhere to the standards of ethical conduct for management accountants. How would those standards affect your behavior in each of the following situations?
1. Late one Friday afternoon you receive a geologist’s report on a newly purchased property. It indicates a much higher probability of oil than had previously been expected. You are the only one to read the report that day. At a party on Saturday night, a friend asks about the prospects for the property.
2. An oil industry stock analyst invites you and your spouse to spend a week in Tahiti free of charge. All she wants in return is to be the first to know about any financial information your company is about to announce to the public.
3. It is time to make a forecast of the company’s annual earnings. You know that some additional losses will be recognized before the company prepares final statements. The company’s president has asked you to ignore these losses in making your prediction because a lower-than-expected earnings forecast could adversely affect the chances of obtaining a loan that is being negotiated and that will be completed before actual earnings are announced.
4. You do not know whether a particular expense is deductible for income tax purposes. You are debating whether to research the tax laws or simply to assume that the item is deductible. After all, if you are not audited, no one will ever know the difference. If you are audited, you can plead ignorance of the law.