12. Ryan and Kim are married and commute to and from work together each day. Rya
ID: 358811 • Letter: 1
Question
12. Ryan and Kim are married and commute to and from work together each day. Ryan, a CPA, works in the Project Budgeting Department of Carson Company, and his wife, Kim, works as an engineer in the company’s Research and Development Department. Kim loves new challenges and cutting-edge technology. She really is hoping to get a new, state-of-the-art Tommy-Jaden machine for her laboratory, but she recognizes that this machine is extremely expensive, and its benefits are difficult to quantify. Carson Company evaluates project proposals, including the pending proposal to buy a new Tommy-Jaden machine, by using a standard net present value approach. Ryan despises people who “cook books” and bias projections, and he never would do so.
a. Does Ryan have a conflict of interest? Explain?
b. Does Ryan have a duty to make any disclosures to his supervisor? Explain?
c. How could Ryan alter his projections to maximize the odds of the company giving “green- light” approval to this capital expenditure? Expain?
Explanation / Answer
Answer (a)
Yes, Ryan has a conflict of interest.
Since Ryan & Kim are husband and wife, working in the same company. So both of them directly can not be engaged in a transaction, where one requests approval and other supports/organizes the approval. This could have bias and will come under conflict of Interest. In this case Kim wants to purchase an expensive machine , for which the project proposal is in review & under approval. Ryan is also a part of the group, hence it has become a conflict of Interest for Ryan. He cannot involved in a approval case, where his wife is seeking the approval.
Answer (b)
Yes, Ryan has a duty to make disclosure to his supervisor, regarding his relation with Kim as she is his wife. Kim also needs to make a disclosure to his supervisor that Ryan is his husband.
Once both Ryan & Kim has made a disclosure to their respective supervisors, it’s the duty of their supervisor’s to ensure that Ryan & Kim both are not engaged in a case/ transaction where conflict of interest can be seen/ arise.
Answer ( c ) –
Ryan to reviews the projections without biasness of his wife Kim and review the projections as per the company‘s genuine requirement, which could add to the benefits to the company for future and it is essential for the company. If the projections pass the basic checks of the capital expenditure, then Ryan can give the green light approval to this capital investment. This how Ryan can maximize value for the company and avoid the conflict of Interest scenario.
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