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IAI Actuarial Core Principles · Business Finance · Ethical responsibilities of owners and managers

A finance manager discovers that her CFO has instructed junior staff to delay recording expenses so that quarterly profit meets analyst expectations. Following a typical professional code of conduct, what should she do first?

She should refuse to take part and raise the matter through the internal escalation or whistle-blowing channel, such as the audit committee. Professional codes demand integrity and objectivity, so obeying a senior's instruction to misstate profit, or staying silent, would breach her ethical duties.

  1. ARaise the concern through the internal escalation or whistle-blowing channel and refuse to take part in the misstatementCorrect
  2. BFollow the instruction, since the CFO is more senior
  3. CInform the press immediately before any internal step
  4. DResign without telling anyone
  5. Record the expenses privately but say nothing

Explanation

Codes of conduct require integrity and objectivity. The correct first step is to refuse involvement and escalate through internal channels such as the audit committee or whistle-blowing policy. Obeying breaches integrity, going to the press first skips proper channels, and silence leaves the misstatement uncorrected.

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