May 2021 Q3 b.
The Estate Manager of Swift International Company was charged to coordinate the procurement process for the award of a contract to construct a warehouse for the company. In the process, the Chief Executive Officer (CEO) called on the manager to ensure the contract is awarded to Gyidi Construction Works, whose owner is the CEO’s friend. When the bids were evaluated, Gyidi placed fourth in terms of responsiveness but being guided by the CEO’s directive, the project was awarded to Gyidi Construction Works.
Being guilty of not acting professionally, the estate manager admitted that he had acted unethically.
Required:
Identify and explain FOUR (4) threats to ethical behaviour as a Management Accountant. (10 marks)
View Solution
Self-interest threat
The threat that a financial or other interest will inappropriately influence the management accountant’s judgment or behaviour.
Self-review threat
The threat that a professional accountant will not appropriately evaluate the results of a previous judgment made or service performed by the management accountant, or by another individual within the management accountant’s firm or employing organisation, on which the accountant will rely when forming a judgment as part of providing a current service.
Advocacy threat
This is a threat where a professional accountant will promote a client’s or employer’s position to the point that the management accountant’s objectivity is compromised.
Familiarity threat
The threat that due to a long or close relationship with a client or employer, a management accountant will be too sympathetic to their interests or too accepting of their work.
Intimidation threat
The threat that a professional accountant will be deterred from acting objectively because of actual or perceived pressures, including attempts to exercise undue influence over the management accountant.