Rita Lane is the accountant for Outdoor Living, a manufacturer of outdoor furnit

Question

Rita Lane is the accountant for Outdoor Living, a manufacturer of outdoor furniture that is sold through specialty stores and Internet companies. Lane is responsible for reviewing the standard costs and making recommendations for adjustments to the controller. While reviewing the standards for the coming year, two ethical issues arise.

Lane has been approached by Casey Henderson, a former colleague who worked with Lane when they were both employed by a public accounting firm. Henderson has recently started his own firm, Henderson Benchmarking Associates, which collects and sells data on industry benchmarks. He offers to provide Lane with benchmarks for the outdoor furniture industry free of charge if she will provide him with the past three years of Outdoor Living’s standard and actual costs. Henderson explains that this is how he obtains most of his firm’s bench marking data. Lane always has a difficult time with the standard-setting process and believes that the benchmark data would be very useful.

1. identify the ethical dilemma.

2. Identify the relevant factors in the situation, and suggest what Lane should recommend to the controller.

Explanation / Answer

Ans

Rita Lane faces the ethical dilemma of confidentiality. Professional etiquette does not allow her to disclose the standard and actual cost details. She can tell that she can make a recommondation to controller and top management for considering it.

Lane's Recommandation to Controller.

Advantage of access to competitors data for bench marking which could eliminate the inefficiency in the process.

Bencmarking gives the motivation to control the cost and measure the efficiecny with which the entity opeartes.

Standard setting would become more easy.

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