Topic: Ethical Issues in Corporate Reporting

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  • 10 Marks

CR – May 2021 – L3 – Q7a – Ethical Issues in Corporate Reporting

Discuss unethical organizational acts and recommend the actions the Chief Accountant should take in a scenario of misrepresentation in financial reporting.

Femmy PLC operates in a city where a major insurance company has just announced a restructuring that will lay off 4,000 employees. For Femmy PLC, accounts receivable represents one of the major assets of the company. Although the company’s annual uncollectible accounts are not out of line, they are material in size. The company is about to submit its application for a bank loan. Sales and net income have declined in the past year, and some customers are falling behind in settling their accounts.

A steady financial performance is necessary to be able to secure the anticipated bank loan. Therefore, management felt there is the need to underestimate the uncollectible accounts this year to show a small growth in earnings. They believe that future successful years will average out the losses.

More so, since the company has a history of success, the adjustments are seen as mere accounting measures and estimates. The Chief Accountant viewed management’s action as unethical.

Required:
i. Discuss the meaning of unethical acts by organizations. (5 Marks)
ii. What should the Chief Accountant do under this circumstance? (5 Marks)

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  • 5 Marks

CR – May 2023 – L3 – Q6b – Ethical Issues in Corporate Reporting

Discuss the ethical implications and possible actions for alleged unethical behavior in a corporate takeover.

On your first day at Omoge Nigeria Plc as the Chief Financial Officer (CFO) of the company, you were sitting in the staff canteen where you overheard a conversation between two Admin Officers. They were gossiping about Mr. Adamu Salisu, the Finance Director.

According to their conversation, Mr. Adamu Salisu may have been involved in unethical activities related to Omoge Nigeria Plc’s takeover of Bobo Limited.

Key details include:

  • Mr. Salisu’s wife, Mrs. Salisu, was a director at Bobo Limited prior to the takeover and owned 30% of its shares.
  • It is alleged that Mr. Salisu substantially overpaid for Bobo Limited and facilitated the overpayment to benefit his wife.
  • The alleged unethical act involved colluding with his wife to falsify records submitted to the accountant conducting due diligence for the takeover.
  • Mr. Salisu is reportedly not well-liked by staff, who consider him intimidating and appear pleased at the prospect of him losing his job.

Required:

Discuss the ethical implications of the above and the possible actions that may arise from the incident. (5 Marks)

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  • 10 Marks

CR – Nov 2016 – L3 – Q5 – Ethical Issues in Corporate Reporting

Provide definitions, examples, reasons, and preventive measures for Creative Accounting and Window Dressing.

Manipulation of reporting entities’ books and records has been termed in many quarters as “Creative Accounting” and “Window Dressing.” The Management of Wastage Plc requires clarification of these two concepts.

You are required to write a report to the management of Wastage Plc. Your report should include:

a. Definitions of the TWO concepts. (2 Marks)
b. FIVE examples of each. (5 Marks)
c. THREE possible reasons for Creative Accounting and Window Dressing. (3 Marks)
d. Advise to management on FIVE possible preventive measures of Creative Accounting. (5 Marks)

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  • 15 Marks

CR – Nov 2022 – L3 – Q6 – Ethical Issues in Corporate Reporting

Evaluate ethical threats and recommend safeguards in corporate reporting practices.

Compliance with the fundamental ethical principles may potentially be threatened by a broad range of circumstances. It is expected for professional members to evaluate identified threats and put up enough safeguards as appropriate responses to such threats. Unless any threat is clearly insignificant, members must implement safeguards to eliminate the threats or reduce them to an acceptable level so that compliance with the fundamental principles is not compromised. Many threats fall into the following categories:

i. Self-interest;
ii. Self-review;
iii. Advocacy;
iv. Familiarity; and
v. Intimidation.

Required:
a. Evaluate two circumstances which may give rise to each of the categories of threats enumerated above. (10 Marks)
b. Recommend two safeguards to eliminate or reduce the threats to an acceptable level. (5 Marks)
(Total 15 Marks)

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  • 10 Marks

CR – May 2021 – L3 – Q7a – Ethical Issues in Corporate Reporting

Discuss unethical organizational acts and recommend the actions the Chief Accountant should take in a scenario of misrepresentation in financial reporting.

Femmy PLC operates in a city where a major insurance company has just announced a restructuring that will lay off 4,000 employees. For Femmy PLC, accounts receivable represents one of the major assets of the company. Although the company’s annual uncollectible accounts are not out of line, they are material in size. The company is about to submit its application for a bank loan. Sales and net income have declined in the past year, and some customers are falling behind in settling their accounts.

A steady financial performance is necessary to be able to secure the anticipated bank loan. Therefore, management felt there is the need to underestimate the uncollectible accounts this year to show a small growth in earnings. They believe that future successful years will average out the losses.

More so, since the company has a history of success, the adjustments are seen as mere accounting measures and estimates. The Chief Accountant viewed management’s action as unethical.

Required:
i. Discuss the meaning of unethical acts by organizations. (5 Marks)
ii. What should the Chief Accountant do under this circumstance? (5 Marks)

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  • 5 Marks

CR – May 2023 – L3 – Q6b – Ethical Issues in Corporate Reporting

Discuss the ethical implications and possible actions for alleged unethical behavior in a corporate takeover.

On your first day at Omoge Nigeria Plc as the Chief Financial Officer (CFO) of the company, you were sitting in the staff canteen where you overheard a conversation between two Admin Officers. They were gossiping about Mr. Adamu Salisu, the Finance Director.

According to their conversation, Mr. Adamu Salisu may have been involved in unethical activities related to Omoge Nigeria Plc’s takeover of Bobo Limited.

Key details include:

  • Mr. Salisu’s wife, Mrs. Salisu, was a director at Bobo Limited prior to the takeover and owned 30% of its shares.
  • It is alleged that Mr. Salisu substantially overpaid for Bobo Limited and facilitated the overpayment to benefit his wife.
  • The alleged unethical act involved colluding with his wife to falsify records submitted to the accountant conducting due diligence for the takeover.
  • Mr. Salisu is reportedly not well-liked by staff, who consider him intimidating and appear pleased at the prospect of him losing his job.

Required:

Discuss the ethical implications of the above and the possible actions that may arise from the incident. (5 Marks)

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  • 10 Marks

CR – Nov 2016 – L3 – Q5 – Ethical Issues in Corporate Reporting

Provide definitions, examples, reasons, and preventive measures for Creative Accounting and Window Dressing.

Manipulation of reporting entities’ books and records has been termed in many quarters as “Creative Accounting” and “Window Dressing.” The Management of Wastage Plc requires clarification of these two concepts.

You are required to write a report to the management of Wastage Plc. Your report should include:

a. Definitions of the TWO concepts. (2 Marks)
b. FIVE examples of each. (5 Marks)
c. THREE possible reasons for Creative Accounting and Window Dressing. (3 Marks)
d. Advise to management on FIVE possible preventive measures of Creative Accounting. (5 Marks)

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  • 15 Marks

CR – Nov 2022 – L3 – Q6 – Ethical Issues in Corporate Reporting

Evaluate ethical threats and recommend safeguards in corporate reporting practices.

Compliance with the fundamental ethical principles may potentially be threatened by a broad range of circumstances. It is expected for professional members to evaluate identified threats and put up enough safeguards as appropriate responses to such threats. Unless any threat is clearly insignificant, members must implement safeguards to eliminate the threats or reduce them to an acceptable level so that compliance with the fundamental principles is not compromised. Many threats fall into the following categories:

i. Self-interest;
ii. Self-review;
iii. Advocacy;
iv. Familiarity; and
v. Intimidation.

Required:
a. Evaluate two circumstances which may give rise to each of the categories of threats enumerated above. (10 Marks)
b. Recommend two safeguards to eliminate or reduce the threats to an acceptable level. (5 Marks)
(Total 15 Marks)

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