Ethic Answer

7/24/2019 Ethic Answer

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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


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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.


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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.


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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.

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