Question 1

Read the case study below, then answer the questions:

Profits Ahead Public Health

Restaurant ABC with 50 chain stores in Country A does not offer paid sick leave. Workers who fall sick face a simple choice: Work and get paid or stay home and get stiffed. Not surprisingly, the Centers for Disease Control and Prevention reported that fully 20 percent of food service workers had come to work at least once in the previous year "while sick with vomiting or diarrhea."

As the new coronavirus spreads across the Country A, the time has come for restaurants, retailers and other industries that rely on low-wage labor to abandon their parsimonious resistance to paid sick leave. Restaurant ABC chains stores were found not paying sick workers to stay home, are endangering their workers, their customers and the health of the broader public. Studies show that paying for sick employees to stay home significantly reduces the spread of the seasonal flu. There's every reason to think it would help to check the new coronavirus, too.

A number of large companies in recent days have announced one-time changes in policy, promising paid sick leave to workers who catch the coronavirus, or who are quarantined. The government of Country A announced a legislation that would let some workers affected by the coronavirus take up to 10 days of paid sick leave, partially at public expense an emergency corrective that is urgently necessary to slow the spread of the virus as well as to limit the resulting economic damage.

But such a temporary change in the law is also grossly insufficient. It would amount to a brief suspension of the harsh and dangerous reality that most low-paid workers cannot afford to stay home when they are sick. What happens when the next pandemic arrives?

The only adequate remedy is to permanently require paid sick leave for all workers.

Throughout history, outbreaks of infectious diseases have often served as catalysts for overdue changes in the social compact, including the creation of public health authorities and water and sewer systems. The government of Country A needs to take the broader lesson from this pandemic and pass legislation mandating that every worker can earn up to seven days of paid sick leave.

Required:

Explain from the following perspective, how might Restaurant ABC chain stores react to such publicity:

(a)Legitimacy Theory perspective;(10 marks)

(b)Stakeholders Theory perspective.(20 marks) [Total: 30 marks]

Question 2

Watts and Zimmerman (1986, p.7) state, Positive Accounting Theory (hereafter referred to as PAT):

... is concerned with explaining accounting practice. It is designed to explain and predict which firms will and which firms will not use a particular method ... but it says nothing as to which method a firm should use.

Required:

(a)Refer to the statement above, identify TWO (2) main elements employed by the Positive Accounting Theory and explain how these elements are used to explain and predict which firms will and which firms will not use a particular accounting method.(15 marks)

(b)In a newspaper article dated 23 November 2020 which commented on the recent budget proposed by the local government: "Credibility will be attained only if budget involves no resort to creative accounting, no over-optimistic revenue assumptions to push spending commitments off beyond the forward estimates where they can't be seen, and no exploitation of loopholes in the definition of the underlying cash balance, including funding spending to The Special Affairs Department (JTSA) and above all else, no shuffled spending and revenue forward and back between time periods to achieve cosmetic results"

You are required to use the insights provided by the Positive Accounting Theory to explain why the above government prefers to manipulate the budget figures.(15 marks) [Total: 30 marks]