Reference no: EM132588643

ACCOUNTING ETHICS:

In your role as an internal auditor for a car manufacturer, you discovered that your employer can produce a car engine that will get 8 more miles per gallon than the existing engine. However, the cost of producing this car engine would be an additional $3,000 per car. Assume that a typical driver drives a car for 5 years and 200,000 miles. Also, assume that the cost of a gallon of gas is $5 per gallon and a typical car gets 24 miles per gallon. The company is wondering if it is ethical to not produce this more efficient engine.

Question 1: Is this an ethical question or just a simple cost accounting problem?

Question 2: How would you analyze this from the perspective of shareholder theory?

Question 3: How would you analyze this from the perspective of stakeholder theory?

Question 4: If this car manufacturer does decide to produce the more fuel-efficient car, would you consider it to be an act of corporate social responsibility?

Question 5: Would your answer to the preceding question be different if the car manufacturer's motivation was simply to increase its profits by selling more cars?