TACC601: Principles of Accounting-Case Study - Accounting and Finance Assignment Help

Assignment Task

Case Study 1: ETHICS AND GOVERNANCE THE IMPACT OF A BONUS INCENTIVE SCHEME ON THE FINANCIAL STATEMENTS

Lucia works as an accountant for a motor vehicle engine parts manufacturer Vroom Ltd. owned by an international car firm. Her manager, Freda Chuse, is paid a bonus depending on the profitability of the company. If Vroom Ltd makes $1 million profit, Freda receives a bonus of $20000 that increases progressively to $30000 for a $3 million profit. If the profit of Vroom Ltd exceeds $3 million, Freda receives the maximum bonus of $30000. Vroom Ltd currently receives a grant from the government of $100000 per year to employ and train apprentice mechanics.

At the end of May, it appears that Vroom Ltd will make a profit of approximately $3.5 million for the year ending 30 June 2019. Freda approached Lucia and said that if the company made too much profit then the government may stop paying Vroom Ltd the grant for training apprentice mechanic, and it would lose the $100000 tax-free cash inflow. Freda instructed Lucia to find ways of deferring recognition of as much revenue as possible until the following financial year, for which the forecast for the industry were quite poor, and to accrue as many expenses as possible at the end of the current accounting period when it came to making the end-of-period adjustments. Although Lucia was not happy with this instruction, she did not want to risk her own opportunities for promotion by upsetting her manage.

Required:

(a) Who are the stakeholders in this situation?

(b) Why do you believe Freda asked Lucia to do this?

(c) What are the ethical issues involved?

(d) Can Lucia defer revenues and accrue as many expenses as possible and still be ethical?

Case Study 2: ETHICS AND GOVERNANCE COMPUTERISED SHIPPING DOCUMENTS

Fremantle Fisheries (FF) operates a fleet of fishing boats out of three ports in Western Australia —Fremantle, Bunbury and Geraldton. Each port has its own fishing fleet and all seafood caught is sold through the Fish Marketing Board, a board established by the state government. The accounting procedures for all sales to the Board are centralised and handled by a computerised accounting system at FF's head office in Perth. The majority of the company's employees work on the fishing boats, and are paid bonuses from head office, depending on the volume, type and quality of seafood caught. This means that head office must be able to identify the source of each shipment sent to the Board.

John Dorey, who was originally based in Geraldton and handled the accounting procedures at Geraldton before computerisation, is now based in Perth as manager of the computerised accounting system. His father and two sisters are still based in Geraldton and work for the company on the fishing boats, as do many friends of the family.

Shipping documents are sent to the Perth head office from all three ports, and the source of the shipment is clearly marked in the top right-hand corner of the documents. Occasionally, however, details of the source are missing, and it is not easy to trace the source quickly. Dorey, in his capacity as manager of the system, is keen to keep the system fully operational and up to date, and has instructed the keyboard operator to insert any one of three Geraldton source codes, namely those of his father and two sisters, whenever the source code is missing from the shipping document. The keyboard operator knows that the codes given are those belonging to his boss's family, but nevertheless complies with the request for fear that non-compliance may lead to his own dismissal.

Required:

(a) Who are the stakeholders in this situation?

(b) What are the ethical issues involved here as a result of Dorey's request and the action taken by the keyboard operator?

(c) If you were the keyboard operator, what action (if any) would you take to prevent this situation occurring? Why?

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