Oliver is a qualified accountant who is employed by Zanger, an unquoted company that manufactures electronic...
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Oliver is a qualified accountant who is employed by Zanger, an unquoted company that manufactures electronic components. Zanger operates from a single, large factory that is the largest employer in Corrtown. Oliver is assisting with the preparation of Zanger's annual report for the year ended 30 September 2017. The company has had a difficult year and it has sustained large losses that have pushed its gearing ratio close to the upper limit imposed by a debt covenant. If the debt covenant is breached then the bank will be entitled to foreclose on the loan, which will put Zanger out of business. Oliver has conducted an impairment review of the equipment in Zanger's factory. In his opinion, the equipment is impaired and an adjustment should be made. He reported his findings to Zanger's Finance Director, who congratulated him for his thoroughness, but then asked him to destroy all working papers relating to the impairment review and to delete any files on his laptop. The Finance Director said that the impairment adjustment would put Zanger in breach of its debt covenant and would cause the bank to put the company out of business. The Finance Director reminded Oliver that the local economy in Corrtown relies on Zanger. Apart from those employed in Zanger's factory, many others work for small businesses that provide Zanger with goods and services. Local retailers depend on Zanger's employees to remain viable. Those who own their own homes will be unable to pay their mortgages and house prices will slump, creating massive financial difficulties. Required: (a) Evaluate the ethical dilemma faced by Oliver and advise him on how he should respond to the Finance Director's request. (b) Critically analyse the assertion that it is often difficult for accountants to identify the public interest. Oliver is a qualified accountant who is employed by Zanger, an unquoted company that manufactures electronic components. Zanger operates from a single, large factory that is the largest employer in Corrtown. Oliver is assisting with the preparation of Zanger's annual report for the year ended 30 September 2017. The company has had a difficult year and it has sustained large losses that have pushed its gearing ratio close to the upper limit imposed by a debt covenant. If the debt covenant is breached then the bank will be entitled to foreclose on the loan, which will put Zanger out of business. Oliver has conducted an impairment review of the equipment in Zanger's factory. In his opinion, the equipment is impaired and an adjustment should be made. He reported his findings to Zanger's Finance Director, who congratulated him for his thoroughness, but then asked him to destroy all working papers relating to the impairment review and to delete any files on his laptop. The Finance Director said that the impairment adjustment would put Zanger in breach of its debt covenant and would cause the bank to put the company out of business. The Finance Director reminded Oliver that the local economy in Corrtown relies on Zanger. Apart from those employed in Zanger's factory, many others work for small businesses that provide Zanger with goods and services. Local retailers depend on Zanger's employees to remain viable. Those who own their own homes will be unable to pay their mortgages and house prices will slump, creating massive financial difficulties. Required: (a) Evaluate the ethical dilemma faced by Oliver and advise him on how he should respond to the Finance Director's request. (b) Critically analyse the assertion that it is often difficult for accountants to identify the public interest.
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Answer a Oliver is in a Right versus Right ethical dilemma Whereas going by his professional ethics ... View the full answer
Related Book For
Cornerstones of Cost Management
ISBN: 978-1285751788
3rd edition
Authors: Don R. Hansen, Maryanne M. Mowen
Posted Date:
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