Q16-2SE-a - Horngren'S Financial And Managerial Accounting

Question

Identifying ethical standards 

The Institute of Management Accountants’ Statement of Ethical Professional Practice requires managerial accountants to meet standards regarding competence, confidentiality, integrity, and credibility. Consider the following situations. Which standard(s) is(are) violated in each situation?

a) You tell your brother that your company will report earnings significantly above financial analysts’ estimates.

Step-by-Step Solution

Answer

The ethical standard violated, in this case, is Confidentiality.

Definition of a financial analyst

The financial analyst refers to the person whose job is to assess the financial position of the business or the assets.

Identification of violated ethical standards

The correct option is Confidentiality standards.

In this case, the information related to the earnings is shared with the brother before it is publicly announced violated the standard of integrity. The company’s financial information should be kept secret before they publish it.