a. Relevant facts to the role of a financial controller of Y Pty Ltd
As the financial controller, John has failed in his mandate. It is the role of a financial controller to make everything in the company is running well and should keep on top of the numbers to ensure a better performance of the company.
Based on the changing roles of financial controllers, John should also be more like a business partner to Sam and is entitled to help in decision-making that will help in enhancing the reputation of the company. In this case, John should have taken control of all the activities of Y in the absence of Sam to ensure everything was on track and ensure the company maintains its history of profitability and stable growth. A financial controller is not simply bestowed with the roles of handling finances or accounting issues but is also expected to be an all-round person which includes provision of insights to support decision making and to ensure continued operation of the business something that John failed in doing. The reasons as to why Sam concentrated in coaching basketball is simply because he knew that as the financial controller, John should have continued with his financial expertise and should also oversee the overall operations of the company hence its continued success. John’s failure led to customer complaints and subsequent fall in sales.
b. Key stakeholders affected
Some of the key stakeholders affected are the employees, owners, customers and the suppliers. All these stakeholders will be highly affected by the current situation of Y Ltd. If the company collapses, the employees, customers, owners and suppliers will be highly affected.
c. Ethical principles that John should consider
John should consider the ethical principles that are stated in the Code of Ethics for Professional Accountants (CPC) when dealing with Racheal. The ethical principles include:
1. Objectivity- The ethical principle of objectivity requires accountants not to compromise their professional judgements as a result of an undue influence of other people (Duska, Duska and Ragatz 2011). If he chooses if to tell or not to tell Sam about the call by Racheal, John should consider whether it compromises with objectivity as an ethical principle. This is because the call made by Racheal and situation with Racheal may impair the objectivity of John and therefore John should try as much as possible to avoid any relationship with Racheal.
2. Integrity- All financial accountants should be honest and straightforward in all their business and professional relationships (Brooks & Dunn 2009). If John accepts to treat the call by Racheal as confidential, then it means that he will not be truthful and the dealings with Racheal will not be fair and therefore it is important for John to put all this into consideration.
3. Confidentiality- The ethical principle of confidentiality imposes an obligation to all professional accountants to refrain from the use of confidential information that is acquired in their business and professional relationships to their personal advantage or o the advantage of third parties (Duska, Duska and Ragatz 2011). John should ask himself whether the deal with Racheal would make him compromise confidentiality as an ethical principle before agreeing to her offer. He should also determine whether he will be compromising with confidentiality if he treats the call from Racheal as confidential. However how hard Racheal tried to coerce John to inform her of the financial situation in Y Ltd, John should maintain confidentiality and should not disclose any confidential information that is acquired in his business and professional relationship with Y Ltd.
4. Professional behaviour- The principle of professional behaviour imposes obligations on all accountants to comply with all relevant regulations and laws and to avoid any action that may result to the discredit of the accounting profession (Duska, Duska and Ragatz 2011). This includes actions which a reasonable third party is informed with all relevant information as this could negatively affect the profession's good reputation. Before agreeing to Rachel’s offers, John should determine if his actions and whether disclosing about the financial situation of Y Ltd will in any way compromise with his professional behavior.
d. Consequences of Johns actions
If John says nothing, then he will be compromising with the accounting ethical principles and may be liable to disciplinary actions such as being deregistered as an accountant from the Accounting Board. John will not have complied with the ethical principles that are provided for in the Code of Ethics for Professional Accountants.
If John tells Sam, then he will not be compromising any of the ethical principles. This is because John is engaged in both a professional and a business relationship with Sam and it is his obligations to follow all the accounting rules and regulations in his business and professional relationship with Sam. John owes Sam confidentiality in all business dealings, truthfulness, honesty, straightforwardness, business behavior and professional judgement that is not as a result of the undue influence of other people.
References
The Code of Ethics for Professional Accountants. Retrieved from http://www2.ifac.org/system/files/publications/files/ifac-code-of-ethics-for.pdf
Brooks L.J & Dunn P, 2009. Business & Professional Ethics for Directors, Executives & Accountants. Cengage Learning
Duska R, Duska B.S and Ragatz J.A, 2011. Accounting Ethics. John Wiley & Sons
Gray I and Manson S, 2007. The Audit Process: Principles, Practice and Cases. Cengage Learning EMEA
As the financial controller, John has failed in his mandate. It is the role of a financial controller to make everything in the company is running well and should keep on top of the numbers to ensure a better performance of the company.
Based on the changing roles of financial controllers, John should also be more like a business partner to Sam and is entitled to help in decision-making that will help in enhancing the reputation of the company. In this case, John should have taken control of all the activities of Y in the absence of Sam to ensure everything was on track and ensure the company maintains its history of profitability and stable growth. A financial controller is not simply bestowed with the roles of handling finances or accounting issues but is also expected to be an all-round person which includes provision of insights to support decision making and to ensure continued operation of the business something that John failed in doing. The reasons as to why Sam concentrated in coaching basketball is simply because he knew that as the financial controller, John should have continued with his financial expertise and should also oversee the overall operations of the company hence its continued success. John’s failure led to customer complaints and subsequent fall in sales.
b. Key stakeholders affected
Some of the key stakeholders affected are the employees, owners, customers and the suppliers. All these stakeholders will be highly affected by the current situation of Y Ltd. If the company collapses, the employees, customers, owners and suppliers will be highly affected.
c. Ethical principles that John should consider
John should consider the ethical principles that are stated in the Code of Ethics for Professional Accountants (CPC) when dealing with Racheal. The ethical principles include:
1. Objectivity- The ethical principle of objectivity requires accountants not to compromise their professional judgements as a result of an undue influence of other people (Duska, Duska and Ragatz 2011). If he chooses if to tell or not to tell Sam about the call by Racheal, John should consider whether it compromises with objectivity as an ethical principle. This is because the call made by Racheal and situation with Racheal may impair the objectivity of John and therefore John should try as much as possible to avoid any relationship with Racheal.
2. Integrity- All financial accountants should be honest and straightforward in all their business and professional relationships (Brooks & Dunn 2009). If John accepts to treat the call by Racheal as confidential, then it means that he will not be truthful and the dealings with Racheal will not be fair and therefore it is important for John to put all this into consideration.
3. Confidentiality- The ethical principle of confidentiality imposes an obligation to all professional accountants to refrain from the use of confidential information that is acquired in their business and professional relationships to their personal advantage or o the advantage of third parties (Duska, Duska and Ragatz 2011). John should ask himself whether the deal with Racheal would make him compromise confidentiality as an ethical principle before agreeing to her offer. He should also determine whether he will be compromising with confidentiality if he treats the call from Racheal as confidential. However how hard Racheal tried to coerce John to inform her of the financial situation in Y Ltd, John should maintain confidentiality and should not disclose any confidential information that is acquired in his business and professional relationship with Y Ltd.
4. Professional behaviour- The principle of professional behaviour imposes obligations on all accountants to comply with all relevant regulations and laws and to avoid any action that may result to the discredit of the accounting profession (Duska, Duska and Ragatz 2011). This includes actions which a reasonable third party is informed with all relevant information as this could negatively affect the profession's good reputation. Before agreeing to Rachel’s offers, John should determine if his actions and whether disclosing about the financial situation of Y Ltd will in any way compromise with his professional behavior.
d. Consequences of Johns actions
If John says nothing, then he will be compromising with the accounting ethical principles and may be liable to disciplinary actions such as being deregistered as an accountant from the Accounting Board. John will not have complied with the ethical principles that are provided for in the Code of Ethics for Professional Accountants.
If John tells Sam, then he will not be compromising any of the ethical principles. This is because John is engaged in both a professional and a business relationship with Sam and it is his obligations to follow all the accounting rules and regulations in his business and professional relationship with Sam. John owes Sam confidentiality in all business dealings, truthfulness, honesty, straightforwardness, business behavior and professional judgement that is not as a result of the undue influence of other people.
References
The Code of Ethics for Professional Accountants. Retrieved from http://www2.ifac.org/system/files/publications/files/ifac-code-of-ethics-for.pdf
Brooks L.J & Dunn P, 2009. Business & Professional Ethics for Directors, Executives & Accountants. Cengage Learning
Duska R, Duska B.S and Ragatz J.A, 2011. Accounting Ethics. John Wiley & Sons
Gray I and Manson S, 2007. The Audit Process: Principles, Practice and Cases. Cengage Learning EMEA
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