Question

Ethics Case

James is a charted accountant at Golden Electronics Bhd. The company operates the business in Klang and involves in manufacturing of electronic appliances. The company currently has recorded total sales of RM25 million. It is the end of the first quarter 2020. James is hurriedly attempting to prepare a financial statement so that quarterly interim financial reports can be prepared and released to the board of directors and the regulatory agencies. While finalizing the accounts, he found that the total credits on the trial balance exceeded the debits by RM3,700. In order to meet the deadline, James decides to force the debits and credits into balance by adding the amount of the discrepancies to the Equipment account. He chose Equipment because it is one of the larger account balance; percentage-wise, it will be least misstated. James “plugs” the discrepancies! He believes that the discrepancies will not affect anyone’s decision. He wishes that he had another few days to find the error but realizes that the financial statements are already late.

Required:

1. Determine three stakeholders in this scenario? Discuss the significant of these stakeholders in the above scenario.
2. Critically discuss the ethical issues involved in this scenario?
3. What are James’s alternatives to overcome his problem? Discuss at least three alternatives.

Answer 1

a)In any Business organisation Stakeholder are employess, individual or certain group or party that has certain interest in an organisation and the outcome of its action. Three stakeholders in the scenario are SHAREHOLDER, EMPLOYESS and CUSTOMERS.

The significant of these stakeholders in the above scenario are discussed below:

1)SHAREHOLDER- The shreholders own the company.They might well have put forward the seed capital which we need to get started so their needs are impotant.The Shareholders are very important stakeholders of the organisation

2)EMPLOYEES: The employees are the persons who put create and deliver the product or services that the consumer consumes.If an organisation looses its employess then customer service will suffer so we must look after them.

3)CUSTOMERS:Without customers the company cannot survive so in all the situation the customer needs to come first. Hence it is one of themost important stakeholders.

b)Unethical accounting occurs when the businessess bend accounting rules or falsify their finanacial statement to present a more favourable picture than actually exists.

In the given scenario James found that the total credits on the trial balance exceeded the debits by RM3,700. In order to meet the deadline, James decides to force the debits and credits into balance by adding the amount of the discrepancies to the Equipment account. The ethical issues or concern involved here is Fakking the Numbers , Disclosure Concern.

FAKING THE NUMBERS:It is the most common ethical concern within reporting and analysing.False numbers in the financial statement may mislead the stakeholders whichin return can play havoc for the organisation

DISCLOSURE CONCERN:The financial statement of an organisation must present true and fair view of the organisation.Proper disclosure of all the material information must be presented fairly to maintain the faith and trust of the stakeholders.

c)James’s alternatives to overcome his problem are discussed below:

i) To combat faking the numbers

ii)Find Misappropriation of Assets

iii)Beat Wrongful disclosure and executive focusing

iv) Create a chain of command