Answer To: The goal of this assessment task is to test your knowledge and understanding of ethical and...
Sarabjeet answered on Oct 10 2021
Accounting Profession
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Contents
Part A 3
Three ethical dilemmas 3
Gather the relevant facts and for each issue describe 3
Why it is an ethical problem 4
Identify the affected parties -individuals, organizations and key stakeholders affected 5
In what way are they affected 6
How would these ethical issues affect the reputation of the accounting profession 8
How would these ethical issues affect the public interest 9
Propose solutions for each ethical issue 10
Identify potential legal issues 10
From the perspective of outsiders 11
Identify affected parties 11
Get professional advice 11
Describe which fundamental principles are affected and what are the threats to compliance with the following fundamental principles of ethics developed by the International Ethics Standards Board for Accountants (IESBA): 11
Propose solutions for each ethical issue, and 12
1. Identify potential legal issues 13
2. from the perspective of outsiders 13
3. Identify affected parties 13
4. Get professional advice 13
Part B 14
Identify and describe TWO (2) sustainability challenges, affecting accounting profession as well as threatening the existence of our planet. Propose solution to each challenges 14
One of the major sustainability challenges facing the accounting 14
Explanation 15
Another challenge to sustainability of accounting profession is Cyber security. 15
References 18
Part A
Three ethical dilemmas
Carillion: Construction industry giant Carillion misshapen under the weight of £1.5 billion in debt. It was formed after the spin-off from Tarmac in July 1999 and later developed into the second bigget construction business UK's with approximately 40,000 employees in the abroad and UK, and a large government from the construction of hospitals to the management of nearly 950 schools contract (A Youssef, 2012).
Patisserie Valerie: The coffee chain Patisserie Valerie was found in 1926 or was acquire by Luke Johnson's Risk Capital Partners in 2006. After the fast growth chain stores grow from eight stores in year of the acquisition to 193 in May 2017. The stock trading of the parent business Patisserie Holdings was suspended in 2018 because of the discovery of potential fraudulent accounting irregularities.
Ted Baker: Ray Kelvin opens his foremost Ted Baker in Glasgow in March 1988. The business developed into luxury apparel marketed on the FTSE 250 with 490 stores and franchises worldwide. After acknowledging the misconduct of the company's 2013 and 2014 financial statements, in 2018 August, KPMG was fined 2.3 million pounds by FRB, as KPMG partner Michael Francis Barradell was regulated by the regulator personally (Carrascoso, 2011). Condemned and imposed a fine of 46,800 pounds. According to the FRC, this bad behavior was the result of KPMG's offer of experts witness services to the Ted Baker in a London lawsuit.
Gather the relevant facts and for each issue describe
Carillion: The parliamentary committee said in May 2018 that its collapse was due to “rure, arrogance and greed.” KPMA received a £1.5 million annual income from the Carillion account and was severely criticized for its rubber stamp. The numbers “wrongly represent the reality of the business” and the conflict of interest arising from its advisory services for pension plans (Cobbin and Burrows, 2018). After the fiasco, some people called for breaking the four giants and making the auditors accountable to the parliament.
Patisserie Valerie: Auditor Grant Thornton was severely criticized for signing his previous full-year account in 2017 November, reporting a net cash of £21.6 million. CEO David Dunckley was summoned to the public affairs selection committee, where he interrupted the search for fraud, which is not the responsibility of the auditor. Members of Congress disagree with this view, which seems to certainly strengthen the case proposed by the CMA (Euler and Kühner, 2017).
Ted Baker: Not only has KPMG announced a shocking yearbook, the yearbook has been selected for its “unacceptable” decline in audit quality, it helps to illustrate the CMA’s concerns about four giants’ dominant markets, The second largest, smaller case provides support for FTSE 350 members who will join the company and explain potential conflicts of interest between different departments of the same company.
Why it is an ethical problem
Carillion: The most convincing words of congressmen are reserved for accountants who should be financial regulators of the company. The KPMG auditor earns about £1.5 million a year because he proves that Carillion’s account “really and fairly” reflects its business, actually the number of rubber stamps, “distorted the truth of business (Ezeagba and Abiahu, 2018)."
Patisserie Valerie: The failure of British entrepreneur Luke Johnson to save Patisserie Valerie was due to the accounting scandal that caused the parents of the bakery chain to go bankrupt and threatened to be troubled in the UK up to 2,800 jobs on the shopping street.
Ted Baker: The FRC stated that misconduct was the result of KPMG's provision of the expert witness service to Ted Baker in commercial court proceeding, which violated ethical standard, which meant that the KPMG was not so longer self-governing in auditing. The Ethical standard is very critical to ensure that the third-party user have self-confidence that they have viable economic statements if they have unfinished information when necessary to verify whether auditor is objective (Huber, 2013).
Identify the affected parties -individuals, organizations and key stakeholders affected
No one said that accounting is easy. For example, estimating profit and loss before a long-term contract is completed involves good judgment. But this should be exercised by managers and auditors in a “professional skepticism” approach, which is a principle that is essential for sound accounting, just as Hippocrates vows to medicine. Congressmen say, on the contrary, members of Congress "have no professional skepticism about Carrian's aggressive accounting judgments, and KPMG is involved." The failure included "not even an agreed work income", which made Carillion propose the healthy performance proves that a large amount of board and dividends bonuses have made the business bankrupt (Iyer and Jennings, 2010). This means that the business can succeed more jobs, generally with taxpayers at other end of contracts. At same time, total deficit of its pension plans amplified to 3.1 billion pounds because of a shortage of contributions. Here, you should see the hand of accountant. In five years to 2017, PwC, the UK's biggest accounting firms, has served as a pension consultant for the company with an annual salary of 2.8 million pounds. Then last year, PricewaterhouseCoopers turned around or began to advise the Trustee of the Pension Plan on how to deal with the Board of Directors of the Carillion.
Patisserie Valerie: Johnson's most compelling company collapsed because the last wave of bids failed to raise new funds from Patisserie's lenders, including HSBC Holdings Plc and Barclays Plc. The company's chairman and largest shareholder, Johnson, has offered £3 million ($3.9 million) of unsecured interest-free loans to help pay January's wages (Lombardi and Cooper, 2015). Unable to contact HSBC for comment, Barclays declined to comment. Due to widespread fraud in its account, Patisserie "cannot update its bank loans, so unfortunately, the company does not have enough funds to repay the debts due.
Ted Baker: "In addition," according to the FRC's statement, "Because the cost of specialists in the relevant years greatly exceeds the audit fees, there is a self-interest threat, KPMG and Mr. Barradell also Failure to pass the settlement of KPMG; the £3 million fine was reduced to £2.1 million. However, KPMG must also pay an amount of £112,000 on behalf of FRC's Executive Advisor. Barradell's settlement fine due to mitigation factors FRC executive consultant Claudia Mortimore said in a commentary to the verdict: "The ethical standards are used to judge third-party users to provide incomplete information only when necessary to judge auditors (Patrascu, 2015). It is important to have reasonable confidence in the financial statements. It is actually objective.
In what way are they affected
At a series of tough joint committee meetings, members of Congress handed over the duties of Carillion directors, KPMG, and pension regulators as well as Deloitte auditors to them - waving their red flags, radical accounting or close to 1 billion The pension deficit of the pound (Roth, 2011).
In a joint statement to discuss the directors of Carillion at the meeting, committee co-chair Frank Field and Rachel Reeves said: "This morning, series of delusions insisted that the whole thing was clumsy until everything happened suddenly moreover unpredictably An error occurred."
Reeves asked former Chief Financial Officer Zafar Khan "to fall asleep" because he ignored Carillion's growing financial problems (Tan, 2015). Speaking of the growing weakness of the Carillion or KPMG's persistence that it was only discovered among March and July 2017, Reeves commented: “Investors seem to understand that working for the business People seem to understand that the only person who doesn’t know what happened is the person who is paid to the company’s directors and auditors.”
In statement issued after the meeting, Reeves added that auditors and regulators seem to be "pure bystanders, at best, commentators, at best, they are Lucomment...