You are the Financial Controller in a family business, though in reality you would be considered...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You are the Financial Controller in a family business, though in reality you would be considered to be the Finance Director. After some financial difficulties a bank and a venture capitalist have invested and acquired over 33% of the shares*, but no Board seats. The continuing support of the Bank and Venture Capitalist are dependent on performance figures being achieved. You have been told that if you put in the "right" figures you will get a large bonus and 1% share option. The company is secretive and as little information as possible being given to the auditors and the investors. You believe that some figures may be being 'massaged'. You have tentatively raised your concerns with the father and son Chairman and Chief Executive. You have been told that if you pursue the matter and/ or fail to put in the right figures you will lose the bonus and share option. Key fundamental principles Integrity - Can you support the business without being involved in potentially misleading information? Objectivity - How can you avoid your financial interest influencing your professional judgement? Professional Behaviour How will you manage relationships with the affected parties? Discussion Identify relevant facts: Consider the business' policies, procedures and guidelines, accounting standards, applicable laws and regulations. Double check your facts, including forecast figures and the assumptions underlying them. Consider whether the culture of secrecy means that you are not in possession of material facts and challenge the management if necessary. Identify affected parties: Key parties are you, the family, professional advisers, bankers and venture capitalists. Other possible affected parties are your family, the Institute and the profession. Who should be involved in resolution: Consider not just whom you should involve, but also why and when. Are there trusted colleagues or friends with whom you can discuss your position? Can your Institute provide advice and assistance? Have you discussed the matter with your family? Possible course of action Discount the short-term financial benefits on offer. Prepare a range of forecasts for the family, and impress on them the implications of short-term manipulation in the long term. Encourage the family to focus on the underlying business issues, and address them to enhance long term value. Draw up realistic figures for presentation, and explain how your professional standing demands that these be presented. Do not become involved in manipulation, and do not allow your name to be associated with figures not prepared by you. Consider whether the values of the organisation are consistent with your own, and if necessary your employment options. During the resolution process, it may be helpful to document the substance of the discussions held, who was involved, what decisions were made and why, and your involvement. You are the Financial Controller in a family business, though in reality you would be considered to be the Finance Director. After some financial difficulties a bank and a venture capitalist have invested and acquired over 33% of the shares*, but no Board seats. The continuing support of the Bank and Venture Capitalist are dependent on performance figures being achieved. You have been told that if you put in the "right" figures you will get a large bonus and 1% share option. The company is secretive and as little information as possible being given to the auditors and the investors. You believe that some figures may be being 'massaged'. You have tentatively raised your concerns with the father and son Chairman and Chief Executive. You have been told that if you pursue the matter and/ or fail to put in the right figures you will lose the bonus and share option. Key fundamental principles Integrity - Can you support the business without being involved in potentially misleading information? Objectivity - How can you avoid your financial interest influencing your professional judgement? Professional Behaviour How will you manage relationships with the affected parties? Discussion Identify relevant facts: Consider the business' policies, procedures and guidelines, accounting standards, applicable laws and regulations. Double check your facts, including forecast figures and the assumptions underlying them. Consider whether the culture of secrecy means that you are not in possession of material facts and challenge the management if necessary. Identify affected parties: Key parties are you, the family, professional advisers, bankers and venture capitalists. Other possible affected parties are your family, the Institute and the profession. Who should be involved in resolution: Consider not just whom you should involve, but also why and when. Are there trusted colleagues or friends with whom you can discuss your position? Can your Institute provide advice and assistance? Have you discussed the matter with your family? Possible course of action Discount the short-term financial benefits on offer. Prepare a range of forecasts for the family, and impress on them the implications of short-term manipulation in the long term. Encourage the family to focus on the underlying business issues, and address them to enhance long term value. Draw up realistic figures for presentation, and explain how your professional standing demands that these be presented. Do not become involved in manipulation, and do not allow your name to be associated with figures not prepared by you. Consider whether the values of the organisation are consistent with your own, and if necessary your employment options. During the resolution process, it may be helpful to document the substance of the discussions held, who was involved, what decisions were made and why, and your involvement.
Expert Answer:
Answer rating: 100% (QA)
As the Financial Controller in a family business where there may be potential misleading information it is important to ensure that the key fundamental principles of integrity objectivity and professi... View the full answer
Related Book For
Physics for Scientists and Engineers A Strategic Approach with Modern Physics
ISBN: 978-0133942651
4th edition
Authors: Randall D. Knight
Posted Date:
Students also viewed these general management questions
-
You are the Financial Controller of Sumac Plc. an unrelated entity to Pine. You recently returned from a workshop on IFRS 9 Financial Instruments a few months ago. On 1 October 2018, Sumac Plc,...
-
7. The following graphs represent before and after dissociation for a HB HB H+ B O Weak acid which has high electrical conductivity Strong acid with low electrical conductivity O Weak acid which...
-
You work for a refinery company. During the year, the price of a barrel of oil increased from $40 to $50. The cost of the inventory of oil at the beginning of the year is $40 or less per barrel....
-
Why do most cities in the United States now have more radios but fewer radio repair shops than they did in 1960?
-
Consider the sales data for Bell, Inc. given in Problem 2. a. Use a three-month weighted moving average to forecast the sales for the months April through December. Use weights of (3/6), (2/6), and...
-
A tank (as in Fig. 9 in Sec. 1.3) contains 1000 gal of water in which 200lb of salt is dissolved. 50 gal of brine, each gallon containing (1 + cos t) lb of dissolved salt, runs into the tank per...
-
Does life satisfaction change by region over time? Use the lifesat_childmort data from Example 2.15 to explore this question. Data from Example 2.15 The World Happiness Report [Helliwell et al.,...
-
Sues Gallery sells original paintings by local artists. All sales occur in the store. Sometimes customers purchase more than one painting. Individual customers must pay for purchases in full at the...
-
14. (3 points) Write a program that ask the user for 1. their first name and 2. their last name, Enter first name: Matt Enter last name: Priem Hello Matt Priem! and then outputs a greeting similar to...
-
A storeroom is used to organize items stored in it on N shelves. Shelves are numbered from 0 to N-1. The K-th shelf is dedicated to items of only one type, denoted by a positive integer A[K]....
-
Draw Sequence Diagram of Webkiosk Portal. (student,webkiosk,server,student account).
-
Littletown Theater has a monopoly over the performing arts market in Littletown since there is only space for one theater. Marginal cost is constant at $30. The following graph shows the demand and...
-
Consider the following data for farmer John who sells tomatoes in a perfectly competitive market. Assume the current market price of tomatoes is $8.00 per bushel, and costs change with quantity as...
-
If a stranger wanted to borrow money from you, what would you want to learn about them before deciding to loan money?
-
Using the Government Finance Officer Association's best principles and elements if the GFOA, does the transportation department budget of Texas follow the "best practices"?
-
Do you believe that the government should help homeowners who could lose their homes or go into foreclosure? Should the government help the financial institutions that provided the loans? What about...
-
a. Define Peer-to-Peer Network (P2P Network). [5 marks] b. Name 4 advantages and 4 disadvantages of P2P Network. c. Mention 5 types of Computer network Servers. [5 marks] [5 marks]
-
Vince, Inc. has developed and patented a new laser disc reading device that will be marketed internationally. Which of the following factors should Vince consider in pricing the device? I. Quality of...
-
A 75 kg student jumps off a bridge with a 12-m-long bungee cord tied to his feet. The massless bungee cord has a spring constant of 430 N/m. a. How far below the bridge is the students lowest point?...
-
FIGURE Q36.5 shows Peggy standing at the center of her railroad car as it passes Ryan on the ground. Firecrackers attached to the ends of the car explode. A short time later, the flashes from the two...
-
A 20 nF capacitor is connected across an AC generator that produces a peak voltage of 5.0 V. a. At what frequency f is the peak current 50 mA? b. What is the instantaneous value of the emf at the...
-
Your firms bank has offered you two options for short-term financing in the amount of \($400,000.\) The first option is a committed line of credit with a commitment fee of 0.5% (EAR) and an interest...
-
The Row Cannery wants to borrow \($2\) million for one month. Using its inventory as collateral, it can obtain a 12% (APR) loan. The lender requires that a warehouse arrangement be used. The...
-
What do you think is the optimum container ship size?
Study smarter with the SolutionInn App