The situation described below is adapted from a case published by the IMA Committee on Ethics
Ethics Case Questions
(The situation described below is adapted from a case published by the IMA Committee on Ethics) UML is a publicly traded corporation that makes various control devices used in manufacturing mechanical equipment. Joe is the president of UML and Tim is the purchasing agent, both have worked at UML for the past 10 years. Charlie is UML’s controller and has been with the company for two years. Joe: Hi, Charlie, come on in. You said you had a confidential matter to discuss. What’s on your mind? Charlie: Joe, I was reviewing our increased purchases from A-l Warehouse Sales last week and wondered why our volume has tripled in the past year. When I discussed this with Tim he seemed a bit evasive and tried to dismiss the issue by saying that A-1 can give us one-day delivery on our orders. Joe: Well, Tim is right You know we have been trying to implement Just-in-Time and have been trying to get our inventory down. Charlie: We still have to look at the overall cost. A-l is more of a jobber than a warehouse. After investigating orders placed with them, I found that only 10% are delivered from their warehouse, the other 90% are drop-shipped from the manufacturers. The average markup of A-1 is 30%, which amounted to about $600,000 on our orders for the past year. If we had ordered directly from the manufacturers when A-1 did not have an item in stock, we could have saved about $540,000 ($600 000 x 90%). In addition. some of the orders were late and not complete.Joe: Now look, Charlie, we get quick delivery on most items, and who knows how much we are saving by not having to stock this stuff in advance or worry about it becoming obsolete. Anything else? Charlie: Yes. I ordered a Dun & Bradstreet credit report on A- l and discovered that Mark Bell is the principal owner. Isn’t he your brother-in-law? Joe: Sure he is. But don’t worry about Mark. He understands this JIT approach. Besides, he’s looking out for our interests. Charlie: (to himself): This conversation has been enlightening, but it doesn’t respond to my concerns. Can I legally or ethically ignore this apparent conflict of interest?REQUIRED: 1.Would Charlie be justified in ignoring this situation, particularly because he is not the purchasing agent? Does he have a responsibility to ensure that the JIT approach is implemented properly? Consider the IMA’s Statement of Ethical Professional Practice.2.State the specific steps Charlie should follow to resolve this matter?
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