ABC Learning Ltd. Business Ethics Report

This report discusses the collapse of ABC Learning Centers due to manipulation of accounts, lack of transparency, and ignoring corporate governance. It also highlights the ethical issues related to corporate governance and the role played by auditors. The report recommends that companies should not overlook their financial statements and should focus on corporate governance. The stakeholders of ABC Learning Centers were managers, board members, bank associations, auditors, customers, and the government. The subject of the report is business ethics, and the course code, course name, and college/university are not mentioned.

Running ead S SS CSH : BU INE ETHI
A C learning ltdB .
usiness thicsB E
Report
Student ameN
[Pick the date]

S SS CSBU INE ETHI 1
Introduction
This case is actually related to ABC learning centers which is one of the largest childcare in
Australia. This case is focusing on ABC learning centers which are almost sure to be positioned
in to bankruptcy after being powerless to form a trustable contract with its banking association,
which is payable above $1 billion. ABC, which accomplishes almost 12,000 childcare centers in
Australia and delivers upkeep for almost 110,000 teenagers, is fronting increasing monetary
difficulties. The corporation’s shares – which have fell extra than 70% this year – continue
postponed as the corporation’s auditors, Ernst & Young, effort to illuminate an amount of
difficulties with the corporation’s accounts (Sumsion and Goodfellow, 2009). ABC is trying to
negotiate for the loan contract with its financiers, run by Commonwealth Bank, which is
supposed to be payable additional amount than $500 million. As per the reports, a reversal
strategy projected by the ABC panel has been disallowed by the banking association.
Reasons for collapse of ABC learning centers
ABC Learning Centers progressed quickly within the time of 20 years that it was fairly
remarkable. There were numerous interior errors inside the business which were the main
reasons for downfall of this remarkable company (Cusack and O'Donoghue, 2012).
This case is pointing out towards the manipulation of accounts and the faults in the bookkeeping
of the company which was not handled properly. It seems to be that there is a huge difference
that is being displayed in the income, profit and loss account of the company (Sumsion, 2012).
Numerous properties had to be zero valued, and pre‐tax incomes were indecisive. It was exposed
that the corporation CEO, Mr. Eddy Groves selected Queensland Maintenance Services (QMS)
fitting to his previous brother in law Frank Zullo for holding everything at ABC Centers. An
entire sum of $74 million was given for this work. ABC Learning had dealings connecting to
liquidate compensations with 123 Global Collection of businesses. ABC Learning would have
123 Global purchase lands, build centers, run them up to unexpected level and then would lastly
purchase the center at a high value from 123 Global (Francis and Zheng, 2010). Appropriate risk
exploration was not complete regarding to the speed international growths thus creating ABC
Learning an extremely jimmied company. For expansion, ABC Learning Company has gone
through mergers and acquisitions, by making influence in the marketplace on the merchandises

S SS CSBU INE ETHI 2
of other companies. The business operation of ABC learning center was not transparent
(Newberry and Brennan, 2013). There was lack of clarity about the working of all centers as well
as the cost operating in their functioning.
The main stakeholders of ABC learning company were managers, board members, Bank
associations, Auditors, customer who are receiving services and government which act as
supporting hand for this company (Leys and Vanclay, 2011).
Ethical issues in corporate governance
The Ethical issues related to corporate governance of the company was that numerous
stakeholders have financed their currency in the company, they were supposing that decisions to
be done on a judicious business foundation, while in this case the judgment to accolade
agreements was not on who providing the finest facilities or the finest price, but just agreed to
connected parties, numerous of whom where possessed or majority detained by Mr. groves
himself. This was not ethically right to ignore the act of the board according to corporate
governance (Stewart and Mackie, 2011). The main ethical issue is that elementary value here is
ignoring the commands of the persons whom are working precisely to estimate the location of
the corporation and take necessary act for its protection. There can be argument that the Groves
was subsequent his own ethics and moral standards in his choices, but in general governing of
the corporation necessity take additional than one man requirements to consideration (Cheng and
Hoang, 2015). There was no deferential information with the stakeholder of the corporation
about the present monetary situation of the ABC Corporation and even there was no cautioning
of the collapse given to these stake holders because of no transparent business operations.
Ethics and Corporate Social responsibility in ABC
As investors spend their money in the company so it is ethical that investors have every right to
know all the business operations of the company and in this case if the investors are put in dark
related to companies decision then the management is actually conducting unethical practice in
the business which ABC company was doing (Pedler and Attwood, 2011). It becomes the social
responsibility of any company to display their financial position related to the present situation in
front of both stakeholder as well as shareholder due to their total dependency on the position of
the company. But here the management didn`t displayed the actually financial position of the

S SS CSBU INE ETHI 3
company in front of both key partners. Whatever may be the decision it should be passed through
the major of board members approval which was neglected in this case because they were
focusing on the decision made by single person i,e CEO. It is unethical to overlook the
performance of the company because of personal relation because it is the performance which
will decided the future of the company not its relations associate (Camargo et. al., 2012). It was
duty of the board members of ABC company to maintain the clean image in the society in which
they were working which they failed by conducting such unethical practices in their business.
Role played by auditors
Almost three auditors had audited this company. KPMG one of the biggest audit companies was
not able to find out any default in their account practices on two materially different opinions
provided by different auditors. A fatal condition was analyzed by these auditors but they ignored
it as current circumstances (Logan, Sumsion and Press, 2015). While the two appointed external
auditors Ernst and Young has provided their unqualified opinion and remained still with their
given opinion. It had been observed that these unqualified opinion about the financial statement
of ABC company has moved this business corporate towards the financial crisis and finally in to
default scandal.
Lesson learned
The failure of ABC Learning (ABC) is complete with teachings for bookkeepers, checkers,
managers and controllers. From its early stages, ABC's involvement into child care delivery,
gave sufficiently of red flags for anybody paying consideration. Inopportunely, the excitement,
defended by Australian's new charismatic boy wonder (ABC's Eddie Groves) led a 'free market'
mergers-and-acquisition intrusion into child upkeep. The refrain of cheer- bests drowned-out the
pessimists (Bouchekara et. al., 2014). No-one required to be trademarked as a non-supporter. As
with numerous high-growth objects that enlarge by union and acquisition, they are deeply
leveraged froths. Finally, bubbles eruption on boundary calls. ABC Learning, extending over
numerous landmasses, distorted and the Australian state, who gave substantial backings to
endowment their picture boy, Eddie Groves, was port to choice up the fragments by guaranteeing
the release bundle.

S SS CSBU INE ETHI 4
Recommendation
In business of like ABC learning company, the management should not go on acquiring small
related business without looking about cost, even though the company is growing. There should
be application of breakeven point somewhere in the business operation. For any business the
most cost is expended on staff and hence the staffing cost must be properly analyzed. The
company must give importance to their financial statement because they decided the future of the
company. In ABC case financial statement was ignored and result is with everyone. Proper
bookkeeping must be done with proper auditing system. For the success of any business the
practice of corporate governance play most important role because it decides the agreement on
the base of quality of the service and cost of the companies operation whom tender is going to be
given instead of personal relations.
Conclusion
Staff is considered as one of the most important part of childcare business which assures the
continuous growth of the company. At many centers, staff is pleased with the excellence of care
delivered. At some place, staff expressed a kind of worries especially when the financial position
of the company. The case is pointing out on the amount of systemic obstacles to the delivery of
great quality upkeep at ABC Learning centers like one direction thinking and neglecting
corporate governance which has ultimately impacted the whole running structure of the
company. Even their bank association ran away in terms of negotiation for the agreement.
Spending lot of money in acquiring small similar operative firms in continuity with only one
purpose in mind that no firm can stand in front of us in childcare services has directed the
business towards bankruptcy. Any company should not overlook their financial statements no
matter what may be the situation at that time because it can result in to downfall of the company.

S SS CSBU INE ETHI 5
References
Bouchekara, H.R.E.H., Abido, M.A., Chaib, A.E. and Mehasni, R. (2014) Optimal power flow
using the league championship algorithm: a case study of the Algerian power system. Energy
Conversion and Management, 87, pp.58-70.
Camargo, A., Morando, M., Avila, L.J. and Sites Jr, J.W. (2012) Species delimitation with ABC
and other coalescent‐based methods: a test of accuracy with simulations and an empirical
example with lizards of the Liolaemus darwinii complex (Squamata: Liolaemidae). Evolution:
International Journal of Organic Evolution, 66(9), pp.2834-2849.
Cheng, M.Y. and Hoang, N.D. (2015) Typhoon-induced slope collapse assessment using a novel
bee colony optimized support vector classifier. Natural Hazards, 78(3), pp.1961-1978.
Cusack, T. and O'Donoghue, G. (2012) The introduction of an interprofessional education
module: students' perceptions. Quality in primary care, 20(3), p.10.
Francis, J. and Zheng, C. (2010) Learning vicariously from failure: The case of major league
soccer and the collapse of the North American Soccer League. Group & Organization
Management, 35(5), pp.542-571.
Leys, A.J. and Vanclay, J.K. (2011) Stakeholder engagement in social learning to resolve
controversies over land-use change to plantation forestry. Regional Environmental
Change, 11(1), pp.175-190.
Logan, H., Sumsion, J. and Press, F. (2015) The Council of Australian Government Reforms
[2007–2013]: a critical juncture in Australian early childhood education and care (ECEC)
policy? International Journal of Child Care and Education Policy, 9(1), p.8.
Newberry, S. and Brennan, D. (2013) The marketisation of early childhood education and care
(ECEC) in Australia: A structured response. Financial Accountability & Management, 29(3),
pp.227-245.
Pedler, M. and Attwood, M. (2011) How can action learning contribute to social capital? Action
Learning: Research and Practice, 8(1), pp.27-39.
Stewart, J. and Mackie, K. (2011) When policy goes wrong: The problem of transmitted
risk. Australian Journal of Political Science, 46(4), pp.669-682.
Sumsion, J. (2012) ABC Learning and Australian early education and care: a retrospective
ethical audit of a radical experiment. Childcare markets local and global: can they deliver an
equitable service, 1, pp.209-225.

S SS CSBU INE ETHI 6
Sumsion, J. and Goodfellow, J. (2009) Parents as consumers of early childhood education and
care: The feasibility of demand-led improvements to quality. Sydney, Australia; Sydney
University Press.