ethic answer
TRANSCRIPT
-
7/24/2019 Ethic Answer
1/4
Ethical 1 18
A revenue is recognised if the significant risks and rewards of the
goods are transferred to the buyer. In this case Hall does not
transfer the risks and rewards to Ribby as the transaction is
reversed shortly after the sales. Such proceeds received by Hall
is reported as loan rather than as revenue.
The manipulation could make up the financial statement of Hall
which could then be sold at a higher price.Although this benefits
the shareholders of Ribby, it creates long term damage as the
financial information presented is misleading.
Professional accoutant must act within the guideline given in
Codes of Ethics. He or she should not bring disgrace to the
accounting profession.
Professional accoutant is highly educated, highly trained, and beable to exercise judgement and self-governace.
Society generally regards accountant to have a higher social
status and someone who is respected. The manipulation
suggested by Ribby will fail the market confidence on
professionals and is not ethically allowed.
Ethic 2 pg 19A corporate has a tight bonding with its surrounding. As a
citizen of the society, a corporate affects and affected by
various actions performed by other citizen.
Corporate social responsibilities (CSR) is the awareness and
accountability of a corporate towards the societies where it
operates.
CSR is usually driven by non profitable target, such as improve
natural environment, helping the poor, or rebuild a community.Such actions will not normally generate tangible return in
short run, which is often regarded as a conflict with shareholders'
expectation.
The most common shareholders' expectation is monetary return.
This includes profit and dividends. Shareholders however
should understand in modern business world, consumers are
more willing to deal with an ethical business than a non ethical
-
7/24/2019 Ethic Answer
2/4
business. CSR will ensure long term wealth creation, which
cannot be achieved by purely considering profit.
Ethic 3
A sale of asset is recognised when the significant risks andrewards of the assets are transferred to the buyer.
To Robby, significant risks and rewards of the land are not
transferred to buyer as :-
i) The selling price is far below the market price, means
this transaction has no commercial substance, and
ii) The transaction contains an option for repurchase
at a price far below the market value of land, meansthe repurchase is highly likely to be exercised.
Robby should recognise the proceeds as loan.
This transaction is commonly used to improve profitability
and liquidity temporarily. Although this could stabilise users'
confidence, such manipulated information is misleading and
will affect users' decision.
Accountant must act within the guideline from Codes of Ethic.Public interest is one of the most important consideration
in discharging accountant's duty. Accountant must advice
the director to reclassify the proceeds received to current assets
rather than offset it against bank overdraft to achieve fair
presentation.
Ethic 4 pg 19
Bower changed its accounting policy from cost model to
revaluation model before the disposal of asset to Minny can be
seen as a try to maximise the loss on disposal to be recorded
in the records of Bower.
A loss in Subsidiary which will then becomes a gain in parent.
This could be an indirect way to declare dividend from Bower
to Minny, by avoiding any payment to non controlling interests.
-
7/24/2019 Ethic Answer
3/4
Also, the gain will not be shown by parent as the asset is
recorded at its purchase price of $1m.
Although this arrangement will enhance the shareholders'
profit of Minny group (by less dividend payment), the financial
information presented are misleading. This affects the decision
making of users, and if this is found out, it will break the trustbetween Minny group and its stakeholders.
Such arrangement is not ethically acceptable.
Ethic 5 pg 20
It is wrong to say profit motive will be conflicting public interest
and professional ethics. Studies shown that these three elements
can be co-exist, and they are needing each other to continue.Modern consumers are more willing to deal with a business
which has awareness on its corporate social responsibilities
and has a certain level of ethics.
Directors of Angel believe in the conflict theory. This could be
due to they want to obtain unfair advantages in order to maximise
profit. This is a short term will and will not ensure sustainability.
Codes of ethics are the fundamental principles that every
professional accoutants must follow. Existence of the Codesshow to everyone that accountants will discharge their duties
in the most professional manner.
The Codes become particularly important when a situation
involves accountant's self-interest. The Codes will always guide
an accountant to handle every situations without bias, and well
balance everyone's interests.
It is wrong to say the Codes are unimportant and irrelevant.
-
7/24/2019 Ethic Answer
4/4
Ethic 6
The director should not give empty promise to the bank at the
first place, and in turn pressure the chief accountant to prepare
manipulated information. If this unethical action is found out by
bank, then it will damage the reputation of the company. To make
the situation worse, bank might take legal action onmisrepresentation from director.
The chief accoutant is facing a difficult situation. While
complying the request from director will make sure he keeps
his job, this is surely going against the Codes of ethics on
integrity and objectivity. If he insists on the Codes, he will put
his job at risks.
The chief accountant should re-examine all data to revise the
forecast. A discussion with the director is needed to find thebest solution. If the outcome is not satisfactory to both of them,
then they should refer this matter to the audit committee.
Lastly, the chief accountant should also keep an eye on his own
professional conduct as he should not openly discuss his
personal matter, including his financial state.