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Accountants and the Ethics of Profit Case Study

   

Added on  2020-05-11

11 Pages3791 Words59 Views
Accounting in the profession 1Accounting in the profession

Accounting in the profession 2Section 1 AbstractThis case study is based on the role of ethics in the profit of Australian retail industry. Thecase study is about the operations of retail industry. Woolworths has announced to restructureits operations by shutting down the stores where the performance is not good and thecompany is planning to reduce its selling price. The Australian competition and consumercommission has taken legal action against Wesfarmers, Coles’s owner because the companyis delaying the payment of its suppliers too much. To eliminate such type of misconduct ofsuppliers, ACCC has issued certain guidelines for Woolworths, Wesfarmers, Coles. Thecompanies involved in the case needs guidance about the lag in the payment of suppliers andsuitable tool to measure the overall performance of the company. From the case, it is analyzedthat the investigation about this case study is done on the basis of different types of onlinearticles and journals. ACCC is concerned with the protection of suppliers of supermarket andwill issue certain policies for the retail companies dealing with the suppliers. As per the givencase, in the retail business, the only thing that matters is the market share. Woolworths andWesfarmers are the largest companies in the retail business because these companies areowing a huge share of Australian retail industry. Woolworths is owing the highest marketshare in Australia’s retail industry. Woolworths is owing 37.3% of total market share, codesgroup has 32.5% of market share. ACCC has set out code of conduct for food and grocerybusiness to protect the interest of consumers and suppliers. One important aspect which showsthe importance of rebate for DSG was when DSG’s earnings before interest tax depreciationand amortization (EBITDA) was $72mand if the rebate was excluded then DSG will face aloss of ($119m).

Accounting in the profession 3Table of ContentsSection 1. Abstract.....................................................................................................................2Section 2. Introduction...............................................................................................................4Section 3. Responses to the Case Questions..............................................................................6Section 4. Conclusion...............................................................................................................10Section 5. References...............................................................................................................11

Accounting in the profession 4Section 2 IntroductionIn Australia, there are almost 140000 players in retail industry. The retail industry is full ofcompetitive challenges. The challenge of online retailing is the latest one. The growth of retailbusiness in Australia is dependent upon the growth of the economy. Retailers are required tooperate under various regulatory constraints so these constraints limit the ability of retailers toinnovate and achieve competitive advantage. As per the estimation of Australian competitionand consumer commission, the online retail business owes 6% of Australian retail industry.The retail companies operate in a broad environment. The macro environment includes thetechnological, economic, political and social influence on the retail business and a retailcompany is required to expand these influences to compete within the retail industry. Thepolicies of government increase the cost for retailers. Woolworths limited and Wesfarmerslimited are the major players of Australian retail industry. There are a number of challengesthat are being faced by the retail industry. Corporate governance is the rules and processes bywhich the company is being carried on. The challenges include brand reputation, corporategovernance, globalization, and customer relationship management, and risk management,effectiveness of market, technological changes, value creation, corporate social responsibilityand supply chain management. Retail industry is facing the issue of auditing. The retailcompanies are facing strong competition so the companies are required to control the cost ofproduction and the existing auditing practices are becoming outdated. The companies dealingin retail industry are required to update the auditing practices with the changes in thecompetition of retail industry. The retail industry is also facing the economic challenge. Retailindustry is being affected by the economic changes. For example: if the economy isdeveloping then it will increase the purchasing power of the people and ultimately the retailindustry of the economy grows. Technology is another issue faced by retail industry. Thecompanies operating in retail industry are required to be updated as per the technology. Theaccounting records of the retail business are to be maintained electronically so the companiesare required to use latest software and systems to make the accounting records more accurateand reliable. The retail industry involves many distribution channels which can be a big issue.The increase in the number of distribution channels will ultimately increase the cost of aproduct and hence, either increases the selling price or reduces the profit margin. Everyintermediary will add his share of commission to the cost of the product. But if the retailbusinesses are planning to achieve competitive advantage then the companies are required tominimize the selling price which can only be done by minimizing the cost of production.Achieving the brand image is easier than maintaining such brand image. Woolworths and

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