Work throughthe case using just ONE of the following models of your choice to reach and justify a responsible and ethical judgment in relation to the case study:

 

1. Langenderfer and RocknessModel (Cull et al. 2021) / The American Accounting Association (AAA)
2. Decision Making Model (Hartman et al. 2020)
3. Good Decision-Making Model(Longstaff et al. 2020)
4. The Moral Intervision Model

 

Clearly identify the decision-making model you are using and then use the subheadings appropriate to the chosen model to structure your response. There is space to w.r.i.t.e your response after the case study.

 

Mark Allocation will be based on the application of the chosen model as follows:

• Application of ethical theories, principles and decision-making models in arriving at reasoned and responsible judgements for professional and corporate ethical issues (30 Marks)
• Application of relevant codes of ethics for accounting/financial professionals in the local or global contexts (30 Marks) 

 

Question 2                                                                                                                (3.5.0 words) [20 Marks]

Mark Allocation will be based on as follows:

• Application of corporate governance principles in the local or global contexts (20 Marks)

Part A- Case Scenario

Since graduating from university, YOU have worked in the Accounting and Finance Department for Sustainable Earth Motors (SEM). SEM is a listed company with subsidiaries in several countries, and takes pride in developing and manufacturing motor vehicles that have efficient fuel consumption, as well as alternative models that use renewable energy. 

 

As part of their corporate governance structure and reporting requirements, SEM emissions and/or fuel economy figures are reported as part of their expanded annual report. The company has an audit committee comprising of independent directors who are knowledgeable about accounting but have very little understanding of emission and fuel economy calculations. 

 

The appointed auditor provides full assurance of financial statements (which includes income statement and balance sheet) but the non-financial reports are not audited, instead the auditor only comments on the consistency of the non-financial information in relation to the audited financial information. In the past the auditor has found no reason to believe that the information contained in the non-financial reports is inconsistent with what is contained in the financial reports.

 

Since the Volkswagen 'Dieselgate' emissions cheating scandal broke, nearly every major car manufacturer since then had all been caught up, in some form or another, in falsifying fuel economy figures or cheating on emissions testing. Due to these disturbing trends, the entire industry has been on high alert and many investigative journalists are often placing car manufacturers under scrutiny, including the company you work for, SEM.

 

An internal review at SEM's production facilities revealed that the vehicle inspectors had used "altered measurement values" on emissions reports and that the tests also "deviated from the prescribed testing environment,". In short, inspectors are using some discretion in how they perform the calculations and measurements. 

 

The inspectors explained that, during the year, only around 5% of vehicles produced are taken offline for emissions and fuel economy testing. The inspectors assure that this sample is chosen at random, and even though it is only 5% of the production run, they are certain it is sufficient to draw conclusions in a cost efficient and effective manner. 

 

Inspectors further added that they had double checked relevant data and confirmed that all vehicles, except their supercar used primarily for competitive racing, had satisfied the safety standards. They clarify further that "The supercar, however, is a sports car with a low annual production volume, and the dataset for this model was too small to enable us to conclusively prove that standards weren't met. It's most likely that they were met, but we simply need to test more vehicles before confirming this. As of now, a high percentage of supercars produced are going through these testing procedures in order to ensure that we have enough data,".

 

As someone who has significant input into the reporting process, you have some major concerns regarding the integrity of the processes and how it is reported in the expanded annual report. You decide to raise concerns with the audit committee. The only response you receive from the chair of the audit committee is that they "understand and regret the potential inconvenience this may cause to stakeholders." Further, they remind you that any reporting in relation to emissions and/or fuel economy information fall outside the scope of the audited financial statements, and therefore you need not be too concerned.  

 

Company shares recently increased by 10% based on the positive annual report announcements, however many media outlets are reporting that SEM shares may be overvalued given the scandals within the wider industry. 

 

Furthermore, you find out that many of the technicians employed by the company, although having background in engineering, have limited expertise of car emissions even though the company offers extensive education programs supervised by the inspectors. 

 

 

Question 1                                                                                                         (8.5.0 words) [60 Marks]

How would you navigate through the ethical dilemma?Clearly identify the decision-making model you have decided to use and then use the subheadings appropriate to the chosen model to structure your response.

 

Question 2                                                                                                         (3.5.0 words) [20 Marks]

With reference to corporate governance best practice principles, critically evaluate ONE corporate governance issue presented in this company and propose recommendations to address the limitations.

Answer rating: 100% (QA)

I have chosen to use the Langenderfer and Rockness ethical decisionmaking model to address this case Fact Finding SEM appears to be manipulating emiss... View the full answer