Should IMA ethical principles apply to nonfinance duties?

THREE YEARS AGO, AMY KIMBELL ASSUMED THE POSITION OF ASSISTANT controller of XYZ Corp. after spending eight years performing assurance services for an international CPA firm. XYZ is now in an expansion mode after recently winning a government procurement subcontract and going public on the Nasdaq

According to her records, she has forwarded to the controller a number of resumes of qualified individuals who are minorities, but very few of these candidates are offered positions. Instead, it seems that he mainly selects applicants who are relatives of Caucasian firm employees. It concerns her that some of the minority candidates have had much stronger education and experience credentials than of those selected. She is also afraid that XYZ many be in violation of EEOC employment guidelines for a federal contractor.

As she tries to decide what steps to take, she has learned that the Sarbanes-Oxley Act of 2002 (SOX) has instituted broad new requirements for public companies to comply with a code of conduct. She has also heard that SOX has provisions protecting "whistle-blowers."

As a long-time member of IMA, Kimbell is familiar with the Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management. She is disturbed that the controller, also an IMA member and a CMA, may not be acting in accordance with these standards. She wonders whether she should bring this situation to the attention of someone above her in the management structure or even outside the company, perhaps the CPA firm that does the annual audit of XYZ's financial statements.

To assess the situation, Kimbell has jotted down a number of potential courses of action:

* Leak her suspicions to a financial columnist at the local newspaper

* Discuss the situation with her immediate superior, and confront him with her evidence that he is acting in a discriminatory manner.

* Discuss the situation with a friend who is an officer in the local chapter of a minority-advocate group.

* Speak with someone in XYZ's human resources department.

* Send an e-mail message to the chairman of XYZ's audit committee.

* Bring up the subject with the audit partner in charge of XYZ's audit informally over lunch.

* Advise a personal friend on the XYZ board (but not the audit committee) of the hiring practices being followed by XYZ.

* Just forget about it.

Requirements:

1. Are there other approaches that Kimbell should consider? What?

2. Evaluate the pros and cons of each of the listed proposed courses of action Kimbell could take plus any others from requirement #1.

3. Which alternative do you favor? Why?

4. Are the IMA Standards of Ethical Conduct for management accountants and financial managers helpful in deciding the proper course of action? Why or why not?--Roland Madison

Roland L. Madison is professor of accountancy in the Boler School of Business at John Carroll University, Cleveland, Ohio.

Curtis C. Verschoor is the Ledger & Quill Research Professor, School of Accountancy and MIS, DePaul University, Chicago, and Research Scholar in the Center for Business Ethics at Bentley College, Waltham, Mass. His e-mail address is cverscho@condor.depaul.edu.