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    Help with Ethical issues in Accounting.

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    I need some help with the following scenario:

    Gianna Tuck is an accountant for Post Pharmaceuticals. Her duties include tracking research and development spending in the new product development division. Over the course of the past six months, Gianna notices that a great deal of funds have been spent ona particular product for a new drug. She hears "through teh grapevine" that the company is about to patent the drug and expects it to be a major advance in antibiotics. Gianna believes that this new drug will greatly improve company performance and will cause the company's stock to increase in value. Gianna decides to purchase shares of Post in order to benefit from this expected increase.

    What are Gianna's ethical responsibilities, if any, with respect to the information she has learned through her duties as an accountant for Post Pharmaceuticals? What are the implications to her planned purchase of Post shares?

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    Solution Preview

    Gianna purchased shares of Post in order to benefit from the expected increase in profit. This kind of case is unethical practice because it is a practice of insider trading. Insider Trading is "buying or selling of a security by someone who has access to material, nonpublic information about the security." 1
    "Insider trading can be illegal or legal depending on when the insider makes the trade: it is illegal when the material information is still nonpublic--trading while having special knowledge is unfair to other investors who don't have access to such knowledge. Illegal insider trading therefore includes tipping others ...