Question $2$

$(25$ Marks

Julia is a Chartered Accountant $($CA$($SA$))$ who works as the Chief Financial Officer $($CFO$)$ for TrendSpree, a fast$-$growing

fast$-$fashion company. The company has enjoyed exponential growth due to its ability to produce clothing at a very low cost

and quickly respond to changing fashion trends.

As TrendSpree expanded, Julia found herself under increasing pressure from the CEO and board members to maintain the

company's high profitability and growth targets. The CEO has proposed opening new stores in international markets, but

there are concerns that some of the target countries have high labor costs, which could affect TrendSpree's pricing model.

Julia is asked to prepare financial forecasts for these new markets, but the CEO pressures her to provide optimistic

numbers to ensure investor confidence, even though she believes that the labor costs in those countries are too high to

maintain the company's current margins. Additionally, the CEO suggests that they manipulate the forecasts to account for

expected cost reductions through "new supplier arrangements," though no such arrangements have been finalized.

Further complicating matters, Julia's younger sister, Zara, is currently working in TrendSpree's marketing department.

Recently, Zara has been working closely with one of the company's major suppliers, BloomTex, which offers premium fabric

at discounted prices for bulk purchases. BloomTex's CEO, with whom Zara has developed a friendly relationship, has

offered Zara an expensive gift for her "hard work" in maintaining the relationship between the companies. Zara excitedly

tells Julia about the gift, which Julia finds inappropriate.

TrendSpree is also under scrutiny from environmental activists due to allegations of poor labor conditions in its foreign

supply chain. The company is considering expanding a partnership with a supplier in another country with more lenient

environmental and labor laws. Julia is asked to sign off on a report that downplays the concerns raised by the activists,

despite the fact that TrendSpree has not made any significant changes to address these issues.

As the company prepares to issue its financial statements, the external auditors request that Julia provide supporting

documentation for certain transactions, particularly around inventory valuations. Julia knows that the valuation method used

by the company inflates the value of the inventory, which is significant for TrendSpree's financial position. The CEO

instructs her not to provide any additional documentation to the auditors and to simply "manage" the situation, hinting that a

negative audit report could damage investor confidence at a crucial time when they are seeking additional funding.

You are required to:

For each of the ethical issues identified in the scenario, answer the following:

Identify the category$/$ categories of ethical threat$($s$)$ present.

Identify the fundamental principle$($s$)$ of the SAICA Code of Professional Conduct that are being

threatened.

Recommend safeguards