Question

Education unlimited Inc. produces very specialized adaptive educational products. The CFO of Education unlimited   Inc. Bill M became aware that a major customer of theirs is closing a majority of their academic campuses and thus the demand for Education unlimited products is likely to be affected significantly. Education unlimited   Inc. president and CEO, Jon M, was very concerned but still asked Bill not to disclose that information due to the potential effect on the stock price. To make things worse for Education unlimited   Inc. questions about the efficacy of the adaptive products is being questioned by the vice president for assessment Doug M, which if valid is likely to affect the demand for the products even further. Jason M, the company’s production manager, hears the announcement of the campus closing and stops Bill M inquiring about the truth of the campus closing and the efficacy issues.

Are there any ethical issues, should any of this information be disclosed to the public, and what is the position of the relevant professional body (the IMA) ?

Answer 1

Jon M has asked Bill not to disclose material information that the revenues are going to drop significantly since it may affect stock is a serious ethical concern. The company must disclose all relevant information which may effect user judgement and aid in decision making process. Not doing so the company will later have to serious legal consequences from the regulator and pay heavy fines. As the IMA Standards of Ethical Conduct for Management Accountants, each member is expected to have credibility i.e. all information must be communicated fairly and objectively. This standard requires that all relevant information must be disclosed that can resonably influence the intended user's understanding of reports, analyses or recommendations. The company will violate the IMA's code of professional conduct by failing to not disclose significant information.