Wednesday, October 9, 2019

Analysis of the Case Study Situation

This report is based on a case study of such a company which is going through a weak financial situation and the shareholders of the company want to sell out the company. This particular report analyzes the situation on the ethical ground. The situation of the company is analyzed based on the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior. After the discussion, the conclusion is provided based on the findings and at the same time it is also mentioned in the conclusion that which step is ethically and legally suitable for the company for handling this particular situation.   According to the given case study, the company is suffering from such a situation in which the shareholders of the company want to sell out it but the managing director of the company wants to save the company by taking some illegal and unethical steps. The main problem of the company is its slow moving stocks, which are in the inventory for more than nine months. The stocks are already written down but in order to save the company and the employment of many employees, the managing director wants to save the company by selling stocks to the prospective buyers at an inflated stock value. The situation of the finance director is very critical in this situation. In one side, there are the lives of many employees and their families those are dependent on this company. However, on the other side, selling the stocks at an inflated rate and not recording their written down value in the yearend financial records is illegal. If this situation is analyzed on the basis of the fundamental principle of integrity, then it has to be said that the steps suggested by the managing director are not only illegal but also unethical. The principle of integrity suggests that the organizations must maintain the correctness and reliability at the time of preparing the financial records (Warhurst 2015). At the same time, it is also suggested by the principle of integrity that the employees of the organization are responsible for the recordkeeping. Di Pietra (2015) stated that integrity is the choice of the individual. The integrity within a human being et al. shows how much the person is ethical. Therefore, from the integrity point of view, if the written down value of the stocks are not recorded in the yearend record, then it will be unethical. At the same time, if the situation is analyzed with the help of the fundamental principle of objectivity, then also the suggestions of the managing director has to be considered as an unethical suggestion. The principle of objectivity suggests that the financial information and recording need to be independent and unbiased (Oraka and TO 2015). Like the principle of integrity, the principle of objectivity also suggests to maintain the reliable and relevant financial statements. Along with this, it also mentions that in order to identify the authenticity, the financial information of the company can be gathered from various sources. According to Himick et al. (2016), the principles of professional competence and due care suggest that the personnel must use their professional knowledge and skills at the time of providing their services. This principle also states that the professional needs to attain the professional competence and at the same time they need to maintain that also. At the same time, the professional must be careful about their activities because they are responsible to the activities done by them (Wachs 2015). Therefore, from this point of view, it can be said that the finance director of the company must use personal knowledge regarding the recording of stocks. The responsibility of the steps taken will be only on the shoulder of the finance director. Therefore, the finance director must be careful enough at the time of taking any final decision. On the other side, the fundamental principle of confidentiality suggests not to disclose any important information to the third party (who is not directly related to the main business) without having proper verification and appropriate authority (Cooper 2016). At the same time, this particular principle also suggests that any information related to the business should not be used for gaining any personal benefit. Therefore, as per the principle of confidentiality, it can be said that the finance director should not disclose the internal weak situation of the company to the external parties. However, at the same time the finance director must try to make the managing director understand that the suggestions given by he is unethical (Harrison and Van der Laan Smith 2015). Hence, it is the responsibility of the finance director to take ethical decision by maintaining the required confidentiality. The principle of professional behavior states that individuals must obey and act as per the legal or regulatory guidelines of the particular profession (Di Pietra et al. 2015). Along with that, the individuals must try to avoid any kind of action or behavior that shows the discredit in his or her profession (Harrison and Van der Laan Smith 2015). Therefore, if the particular situation is analyzed, then it must be said that the managing director of the company has not maintained the principle of professional behavior. However, the finance director of the company must act as per the principle of professional behavior. This will help to maintain the work ethics and at the same time this will save the finance director from any kind of legal issues.   In the above discussion, it has been identified that the internal financial situation of the particular retail company is not good. The stocks of the company remained unsold for several months and so it became a burden for the company. However, before few months, the company has written down the value of the old stocks. On the other side, by understanding the situation the shareholders of the company want to sale the business but the managing director wants to save the business anyhow.   The suggestions provided by the managing director to the finance director of the company cannot be undertaken as per the fundamental principles of integrity, objectivity, professional behavior, confidentiality and professional confidentiality and due care. However, if the situation is analyzed from all the perspectives, then it must be said that if the company is sold out then many people those are the employee of the organization will be jobless. The families of the employees will face serious problem to survive. On the other side, if the finance director considers the suggestion of the managing director, then also the future of the company will be unsafe and at the same time, this will be a cheat with the shareholders and prospective customers of the company. Apart from these, if the finance director takes the suggestion of the managing director, then that will be also against the professional behavior and ethics. The whole responsibility of the situation will be on the shoulder of the finance director only. Therefore, in such a situation, the finance director of the company must conduct a meeting with the shareholders and managing director and must discuss about the situation in detail. The finance director must state each consequence those will take place if any of the two suggestions provided by managing director and shareholders is taken. If any better idea is not developed then the finance director must act according to the legal and ethical guidelines and in that case, the company must pay some amounts to its employees for the sudden close of the company.  Ã‚   Cooper, S., 2016. Faculty Review of Accounting Principles: A Business Perspective. Di Pietra, R., McLeay, S. and Ronen, J., 2015.  ACCOUNTING & REGULATION. Springer,. Harrison, J.S. and Van der Laan Smith, J., 2015. Responsible accounting for stakeholders.  Journal of Management Studies,  52(7), pp.935-960. Himick, D., Brivot, M. and Henri, J.F., 2016. An ethical perspective on accounting standard setting: Professional and lay-experts’ contribution to GASB’s Pension Project.  Critical Perspectives on Accounting,  36, pp.22-38. Oraka, A.O. and TO, O., 2015. The Impact of Professional Accounting Ethics in Quality Assurance in Audit.  International Journal of Academic Research in Business and Social Sciences,  5(8), pp.64-78. Wachs, M., 2015. Professional Ethics in Planning.  Readings in Planning Theory, p.464. Warhurst, J., 2015. A Study of Ethics for Accounting Students at East Tennessee State University Welfel, E., 2015.  Ethics in counseling & psychotherapy. Cengage Learning.

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