Accountant Rusty Carr is reviewing the Quality Report for the Radio Assembly Dep

Question

Accountant Rusty Carr is reviewing the Quality Report for the Radio Assembly Department of Safety Communications. You are a friend of Rusty and an Accountant Professor. He notices a recurring flaw in the performance of the radios that may lead to malfunctions when the radios are exposed to moisture – the risk of malfunction appears to be rare. The company is in the midst of an IPO trying to raise money to stay in business.

Safety Communications is the only employer in the town that has suffered from mass unemployment. Further, the company prides itself on quality and any talk of quality issues will impact the company’s IPO. Hundreds of these radios are shipped out each month including 5,000 shipped so far this year.

Rusty has only been with the company for a few months when he takes the issue to the company controller. The controller tells him that he is ‘just an accountant’ and quality issues are the domain of the engineers. By the way - these radios are used by first responders - such as fire fighters.

A.Use one of the models below (or another model you prefer) to analyze the problem from Rusty’s perspective.

B.Give Rusty advice on what he should do – detail the model and how you reached your decision.

C.Carefully document your use of the process either as a spreadsheet, outline, list or flow chart.

D.Be sure you determine the impact on all of the stakeholders.

E.Submit your advice as a memo, including the documentation you prepared in item.

F.Be clear and concise as to what Rusty should do.

Ethical Decision Making Models for Rusty Q/Q Model Ethical Model 1. Frame the ethical issue 2. Gather all the facts 3. Identify the stakeholders and Define the problem and define the stakeholders objectives options Implications 2. Identify quantitative and qualitative 3. Identify and list and analyze available 4 List the relevant core values .Consider the environmental and ethical6. Identify the accounting issues 5. Select the best option obligations 5. Identify the operational issues 7. List all the possible alternatives 8. Make an ethical analysis of the alternatives 9. Decide on a course of action 10. Reflect on your decision

Explanation / Answer

Following are the steps involved in any decision making problem and these steps can be used to make thoughtful and responsible decisions.

•             Establish the facts in the given situation

•             Identify if the scenario involves any legal or ethical issues

•             identify options and their possible consequences

•             Critically Evaluate Options

•             Select the best option

•             Implement the final decision

Establish the Facts in give Situation:-

Company Safety communications develop radios, which are used by emergency service operators and first responders like fire fighters. These are critical part of the entire emergency response and these radios have inbuilt Flaw. Safety communications is the only employer in city and is undergoing the IPO Process to raise money from Market.

Rusty who is an Accountant and is very new to company (joined few months back) have the quality report of Radio Assembly department of Safety Communications. Rusty finds the flaws in product (Product would malfunction if exposed to moisture) and reports it to company controller.

Since the Company is due for releasing IPO a lot is on stake and all the stakeholders including owners, employers, customers, partners and suppliers, and community and environment will have impact if anything goes wrong.

Legal & Ethical issues Involved:-

As the communication devices are used by emergency response teams any issue in these devices will sabotage the entire rescue and emergency response operations. It will put the lives of emergency response team and the people in distress at risk.

There is certainly legal and ethical issues involved here. It’s the legal and ethical responsibility of company to inform all customers about the potential risk of product malfunction, if the product is exposed to moisture. As per the quality report the changes of malfunction are rare, even though it’s the legal responsibility of company to fix the flaw and inform the consumers about the potential damage to its already existing customer, so that they can take necessary precautions to save their product from moisture and minimize the risk of malfunction.

Company should also make a press release and send notification to inform customers about the potential malfunction causes and how to prevent those.

As the company is looking to raise money via IPO its responsibility if company to ensure they enlist the potential flaws to their products and fix those issues which could lead to product failure and further stop the production and thus putting the money of investors at risk.

It’s also the responsibility of company to protect its brand value and maintain the product quality as per industry standards and meet all the regulations.

As the safety communication is the only employer in town which already is suffering from massive unemployment, it’s the responsibility of company to provide sustainable growth environment.

Identify options and their possible consequences

Rusty have following options

Follow-up with company management to get the issue fixed and arrange for sending communication to existing customers to protect their devices / product form potential damage. Or arrange for a product rollback and replacement of flawed design / product.

Become a whistle blower and bring the product flaw and quality report in public domain

As we know company thrives on its product quality and is trying to monetize its brand via IPO and raise money by attracting additional investment.

Any step followed by company would have a major impact on its brand, its owners, its employees, local community and environment.

As the product is used by the first responders like fire fighters, it becomes highly critical that the product is rectified asap to save its brand name and avoid putting lives of hundreds of people at risk.

If company product fails then the production plant would shut down thus leading to lay off and further adding unemployment to the city which is already suffering from massive unemployment and is the only employer in town.

If people loose job, they have no other option and would have to move to other town for employment or wait for government help for unemployment. This will add extra burden over the city as well.

If the customers of product are not informed then this puts the entire emergency operations at risk.

Critically Evaluate Options

The best option in the current scenario where company is undergoing the process to attract investment from market by IPO, it becomes extremely critical for company to protect its reputation and brand.

What company could do is to make sure it develops additional safety measures for the devices it manufactures like an extra protective case, which can be distributed for free to existing customers so that the potential moisture damage can be prevented which could result in the product malfunction.

For the existing product under production they should revisit the design and improve the product quality so that its susceptibility to moisture can be eliminated and product can work in all weather conditions.

This in turn will save the product and company brand along with its customers. Thus the company can still recover from the potential closure and product death.

If company doesn’t listens to Rusty and tries to hide the facts and flaws in the product then Rusty could become the whistleblower and can reach out to legal authorities and report the issue and product flaws so that the authorities can take necessary corrective and preventive actions.

But this action could potentially lead to company closure and massive lay off and unemployment and getting the product removed from market / customers.

Selecting the Best option & implementation of final decision

The best option in the interest of all the stake holder should be decided and implemented.

In this scenario all the aspects like massive unemployment risk of company shut down, damage to product brand should also be evaluated along with the rare event / chance of product malfunction.

If company closes people will lose job, if product is not fixed then the life of emergency service personnel is also put to potential danger.

Rusty should follow-up with company management and should develop a complete end to end plan and business case, to provide alternative protective measures like a protective carry case which can be distributed to existing customers which can protect the product and eliminate the chances of malfunction.

Also he should calculate the additional cost burden it will add to the company for product design change and development and distribution of the protective carry case.

Company should evaluate the recommendations form the quality department and ensure that the product flaws are fixed and the best quality product is delivered

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