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Pages:
2 pages/≈550 words
Sources:
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Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Coursework
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 11.23
Topic:

Ethical Issues in Accounting and Management

Coursework Instructions:

Question 1 (10 marks)
ETHICS CASE
The management team of Positive Perception Ltd was faced with a financial crisis. The entity was in breach of a loan agreement and had to repay a major loan at short notice. To raise the necessary cash, one of Positive Perception Ltd’s successful subsidiaries (a company owned by another company) was sold. While this solved the liquidity and solvency problems, it reduced future earning potential. As chief accountant, you have been asked to provide a list of 20 financial ratios along with some other operating statistics relative to Positive Perception Ltd’s first-quarter financial data and operations.
Two days after you provide the ratios and data requested, you are asked by the public relations officer to prove the accuracy of the financial and operating data contained in the press release. In the press release, the managing director highlights the sales increase of 25% over last year’s first quarter and the positive change in the current ratio from 1.5:1 last year to 3:1 this year. The managing director also emphasises that production was up 50% over the previous year’s first quarter. You note that the release 788 Financial Accounting: Reporting, analysis and decision making — 5th edition contains only positive or improved ratios and none of the negative or deteriorated ratios. For instance, the profit margin, which showed slight improvement from 6% to 7%, was reported but the interest cover, which had declined, was excluded. None of the ratios used profit from continuing operations, which was considerably lower. For instance, the profit margin from continuing operations was only 3%. The public relations office emphasises: ‘The managing director wants this release by early this afternoon’.
Required:
(a) Who are the stakeholders in this situation?
(b) Is there anything unethical in the management team’s actions?
(c) Should you as chief accountant remain silent? Does the accountant or public relations officer have any responsibility?
(d) If you do not want to remain silent, who should you speak or write to?
Student Answer:
Question 2 (20 marks)
Financial information for Ridge Ltd is as follows.
Required:
(a) Prepare a schedule showing a vertical analysis for 2016 and 2015. (10 marks) Show workings.
(b) Prepare a brief report outlining the results of your analysis for a potential investor and advise if the investor should invest in Ridge Ltd. (10 marks).

Student Answer:

Coursework Sample Content Preview:

Accounting for Ethical Case
Student Name
Institutional Affiliation
Accounting for Ethical Case
Question 1
(a) Who are the stakeholders in this situation?
The stakeholders within this context include those associations and parties with some stake or interests in the firm. For this particular case scenario, the stakeholders include financial intermediaries whose loan contract was terminated, Positive Perception Limited management team, investors or shareholders, the chief accountant, and public relations officer.
(b) Is there anything unethical in the management team’s actions?
The company’s management team engaged in unscrupulous practices. It was highlighted in the case scenario that the company’s subsidiary was liquidated to meet the parent company’s debt. Accordingly, the management required the chief accountant to report financial ratios, including the group’s financial situation, after liquidating the subsidiary. During a press release, the management presented before the public relations officer mainly positive and improved ratios while excluding the weakened ratios. Furthermore, the ratios never incorporated “profit figures” from the company’s continued operations. Therefore, it was unethical to present the wrong or fraudulent image of the firm’s financial position to the public or the stakeholders.
(c) Should you, as chief accountant, remain silent? Does the accountant or public relations officer have any responsibility?
As the company’s chief accountant, I would not have remained silent after witnessing such unethical practices, including fraudulent presentation of the firm’s financial position. I would blow the whistle against the company’s management. The accountant is responsible for the firm’s management and financial reporting and ensures that records adhere to accounting standards. Also, accountants are tasked with preparing performance and financial reports, helping functional units with annual reviews and budgets, including internal tax and control responsibilities (The International Federation of Accountants, 2021). The public relations officer should be responsible for ensuring the company’s goodwill and reputation, including handle press inquiries and manage crises (Gilaninia, Taleghani, & Mohammadi, 2013). The firm’s correct reputation and the picture are within public relations domains.
(d) If you do not want to remain silent, who should you speak or write to?
Since I won’t remain silent in this specific scenario, I would speak or write to the auditor or the audit committee informing them of the management’s fraudulent practices. Accordingly, I would officially write to the relevant committees and the human resources department to brief them of the happenings to evaluate the actions and take prudent actions to protect the co...
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