Ethics

Question 1

What do the directors have an ethical responsibility to do?

Answer 1

To produce financial statements which:

1. Comply with accounting standards
2. Are transparent
3. Are free from material error

Question 2

What could understating liabilities do?

Answer 2

Mislead stakeholders

Any adverse publicity could lead to a loss of public trust in the accounting profession

Question 3

What could concealing relevant documents do?

Answer 3

This is a breach of the fundamental principles of objectivity and integrity as outlined in the ACCA Code of Conduct

Question 4

What steps should the financial controller take to resolve the issues?

Answer 4

Remind the directors of their ethical responsibilities

Remind them that the financial statements MUST FULLY comply with accounting standards

Records of these discussions should be kept

If disagreements remain, the financial controller should seek advice from the ACCA
The financial controller may need to consider resignation if no effective channel for internal reporting of concerns exists