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- 10 Marks
Question
The IT Director of Uswatu Ltd (Uswatu) has asked you to undertake a cost-benefit analysis of a proposed new IT system. The IT Director will use this analysis to convince the Board of Directors of Uswatu that they should invest in the new system. As part of your analysis, you found that the new system will not run properly on Uswatu’s existing computers. This means that Uswatu would have to replace most of their existing Desktop computers and servers, leading to an excess of costs over benefits.
The IT Director has suggested that you downplay the cost of replacing the IT infrastructure as he was sure that he ‘could find a work-around’ that would allow the existing computers to use the new software, though he was currently uncertain how this would be accomplished.
The IT Director has told you that he ‘expects’ the cost-benefit analysis to show a favourable result for the new system and has indicated that your future promotion prospects may depend on this.
Required:
Explain the IFAC’s fundamental ethical principles that you would be breaching if you agree to do the IT Director’s request. (10 marks)
Answer
IFAC Fundamental Principles That Would Be Breached:
- Integrity:
- This principle requires members not to be associated with any form of communication or report where the information is materially false, provided recklessly, or incomplete. Potential problems with the proposed new system that will result in large cash outflow from Uswatu to upgrade the system have been identified. Following the IT Director’s suggestion would involve ignoring the issue without a firm idea of how it will be resolved. This means that the report will be incomplete and misleading to its users.
- Objectivity:
- This principle requires accountants to ensure that their judgment is not compromised because of bias or conflict of interest. It is likely that the director’s demands will be adhered to because failing to do that may jeopardize job career prospects. This would clearly be acting in one’s own self-interest, compromising objectivity.
- Professional Competence and Due Care:
- This principle requires accountants to follow all applicable technical and professional standards when providing services. It is clearly known that the cost-benefit analysis, when undertaken properly, shows an unfavorable result for the new IT system. Failing to use the correctly obtained result could be seen as a failure to meet professional and technical standards.
- Professional Behavior:
- This principle requires accountants to avoid any activities that might bring the profession into disrepute. If you are found to have knowingly misled the Board of Directors into buying a system that is not cost-effective, it would clearly damage confidence in the accountancy profession.
- Tags: Cost-benefit analysis, Ethical Principles, IT System, Professional Integrity
- Level: Level 2
- Topic: Business ethics
- Series: NOV 2018
- Uploader: Kwame Aikins