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    Case Study in Financial Reporting: Ethical Responsibility of Ken Martin, an Engineer at a Multinational Aerospace Firm

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    Ken Martin is an engineer with a multinational aerospace firm that produces a jet engine widely used by airplane manufacturers. Ken recently became aware of a potential defect in an engine part. As the lead engineer responsible for the part, Ken required tests be performed to ascertain the conditions under which the part might fail. The results of the tests indicate that at low temperatures a critical seal may crack, possibly allowing fluids to leak into other portions of the engine. Although the risk of such a leak is very low, the consequences are potentially disastrous.

    Questions to consider:

    1. What are some of the options available to Ken?

    2. Does the company have an ethical responsibility to fix the part? Why or why not?

    3. Should the company consider the estimated cost of fixing the part in its decision-making process? Why or why not? Where the cost would be reported?

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    Solution Preview

    1 -- Ken became aware of the defect in the engine part. He then ran tests to determine the consequences of the defect and learned it could lead to disaster. Ken can decide to (1) do nothing, (2) determine the best course of action to replace the parts, or (3) take action to recall (or ground) all planes that currently have the part until the defect can be corrected. Ken can also immediately meet with management to take immediate actions that would keep people safe in areas where the engine ...

    Solution Summary

    This solution provides a detailed answer based on the Ken Martin scenario. Each question is addressed and the best course of action for Ken to take, is advised. The options, the company's responsibility, and the costs to fix the problem are all addressed. Includes 2 references.