Flexible Budgets and Standard Cost Systems

Flexible Budgets and Standard Cost Systems

Flexible Budgets and Standard Cost Systems

Question 1

According to the IMA statement of ethical practices, a member is expected to uphold a significant number of ethical duties. As it is stated there, a member’s failure to abide by the set standards is at the risk of facing punishment (Armstrong, 2002).

At the given scenario, Lane is the accountant for a furniture company. She is in charge of coordinating the finances generated and consumed by the business, by doing so; she comes with some ideas on how the finances may be managed effectively for the best utilization by the business. Her former colleague Casey, who had recently opened a benchmarking firm, approaches her. Lane has had problems with standard setting in the company, and she believes that data from a benchmark would be of great help. This is where the dilemma sets in (Armstrong, 2002).

According to Casey, some information is needed for the benchmarking process; this information includes some years of outdoor living, standard and living costs. Casey goes on to reveal that the information is needed for the benchmarking process. Lena is facing a dilemma. She is in need of data from a benchmark since she believes that it would help her in the process of setting standards. On the other hand, if she were to disclose the company’s secrets to Casey, she would be violating one of the standards set by the IMA’s Statement of Ethical Professional Practice, which requires employees to observe some form of confidentiality (Collin, 2011). The statement clearly states that information should only be disclosed when the need is, for legal processes (Armstrong, 2002). The rule also clearly explains that one should refrain from using the confidential information to gain any advantages. According to (Armstrong, 2002), a professional especially accountant, is expected to abide by a strict code of ethical conduct, Lane is no different.

Since it has been revealed that Casey’s firm does sell the benchmarking information to other companies, it can be safely concluded that the information is being used for gaining illegal advantages as the company, which the information is being sold to, will use it for their own selfish gains. She is currently facing this dilemma (Armstrong, 2002).

Question 2

The situations relevant factors are that Casey needs confidential information from Lane. In exchange, he will provide Lane with some relevant information that will later end up helping Lane in the standard setting process. Another relevant factor is that Lane is bound by a code of professional conduct that works for hand in hand to prevent her engaging from such an act as disclosing the personal information elsewhere. These facts also summarize her dilemma since the information gained might better the business in the future (Armstrong, 2002).

Lane should recommend to the controller that they should take Casey’s offer. A benchmark would serve various purposes not only in the process of setting standards but also in many other sectors. It might be even used for future references. It is even the perfect time for them to do so since Casey is willing to benchmark their business free. If Lane had gone behind the controllers back and sought the information for herself, it would have been considered unethical, however doing so with full support, the controller would not. However, Lane should insist on offering Casey with just a fraction of the financial data since three-year data sounds a little too large.


Armstrong, M. B. (2002). Ethical Issues in Accounting. In N. E. Bowie (Ed.)

Collin, J, (2011) IMA’s Statement of Ethical Professional Practice- https://www.imanet.org/-/media/b6fbeeb74d964e6c9fe654c48456e61f.ashx?la=en


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