Accounting and Business Studies: Ethics and Liquidation

The provided assignment is a compilation of research papers and articles related to accounting and business studies. It includes topics like ethics in leadership, the auditor-client revolving door, financial expertise on audit committees, earnings management practices in Australia and New Zealand, and the effects of voluntary liquidation on businesses. The document also references real-life examples such as HIH Insurance, Stellar Homes, Aluminium Boats Australia, and HMAS Bundaberg fire, which led to their respective collapses or going into administration.

ACCOUNTING FINANCIAL

EXECUTIVE SUMMARY
Financial accounting is referred as specialised branch which recordss financial
transaction of business unit. The present report will discuss about liquidation due to inability for
meeting due liabilities in well-publicised companies such as Aluminium Boats Australia, Stellar
homes and HIH insurance. The APES 110 Code of ethics for professional accountants are issued
through with all other accounting professional and ethical standards. The members which are
practising abroad and in Australia should always comply with code until they are prevented
through performing applicable regulations along with legislation. It has been concluded about
liquidation of Aluminium Boats Australia, HIH insurance and Stellar Homes. This assignment
has provided with reasons due to which the organisation was liquidated which has provided with
the understanding that American Boats Australia was liquidated due to fire event.

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
Events that lead to liquidation..........................................................................................................1
Aluminum Boats Australia.....................................................................................................1
HIH Insurance .................................................................................................................................1
Stellar Homes.........................................................................................................................2
APES 110 Code of ethics for professional accountants...................................................................3
Corporate governance issue.............................................................................................................3
Aluminum Boats Australia.....................................................................................................3
HIH Insurance .................................................................................................................................4
Stellar Homes.........................................................................................................................5
Liabilities.........................................................................................................................................5
Aluminum Boats Australia.....................................................................................................5
HIH Insurance .................................................................................................................................5
Stellar Homes.........................................................................................................................5
RECOMMENDATIONS.................................................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Financial accounting is considered as very specialised branch which traces financial
transaction of business unit. The present report will discuss about liquidation due to inability for
meeting due liabilities in well-publicised companies such as Aluminium Boats Australia, Stellar
homes and HIH insurance. Liquidation is replicated as process of upbringing business at end
along with distributing its assets to its claimants. Further, this report will be reflecting events
which led to liquidation and discussion about APES 110 Code of ethics for professional
accountants along with 5 codes of ethics. In the same series, it will articulate about issues related
to corporate governance which has contributed for collapse of business unit. Lastly, it will state
liquidation type and about contributing factor which will led to downfall.
Events that lead to liquidation
Aluminum Boats Australia
There was liquidation in year 2014 because of fire event as HMAS Bundaberg destroyed
during refit at Hemmant shipyard related to Aluminium Boats Australia. With this event,
organization lost contract for purpose of maintenance and servicing of Australian Navy vessels
and forced for cutting 90 jobs. Further, 70 staff were directly sacked after administrators
appointment through FTI consulting which are expected for undertaking less than 5 weeks for
purpose of assessing future of organization. The Aluminium boats Australia has attained
expertise in the manufacturing along with maintenance of defence, luxury and commercial
vessels with contracts to Royal Australian Navy, Mooloolaba Coast guard, Queensland Police
services and Cruise Whitsundays (ALUMINIUM BOATS AUSTRALIA IS UNDER A NEW
MANANGEMENT, 2019).
HIH Insurance
HIH insurance is the general insurance company operating in various countries. The
organisation was placed into provisional liquidation due to its failure to obtain sufficient funds
for its operation. The Australian prudential regulation authority has provided the company with
notice to appoint the liquidator and then This organisation applied in court for provisional
liquidation as the organisation were having deficit of its assets over its liabilities (Hsu, Moore
and Neubaum, 2018). Also, the organisation were having a poor corporate governance which
was one of the reason for its liquidation. The another relation which lead top the liquidation of
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HIH insurance was inadequate and inappropriate asset's valuation as the company always shows
its assets at the high value than its actual value.
Moreover, HIH Insurance applied for provisional liquidation due to conglomerate
complexity which was the issue faced by the company various times. Furthermore, HIH
insurance was also involved in under provisioning its assets which lead to the event of its
liquidation. Also, the reason for liquidation also include the abuses of reinsurance (Schneider,
2018). In addition to this, HIH insurance failure included lack of integrity of information
provided to the HIH board and to the auditors (HIH Insurance, 2015). The organisation was
liquidated due to this reason which led the firm into insolvency and thus it applied for the
provisional liquidation as the firm didn't have funds for operations and to pay the claims of
creditors.
Stellar Homes
Stellar Home had gained expertise for building dream houses as it replicates to
accomplish all requirements of every family. The owners of home plays extreme important
contribution in process of building and its objective is for ensuring about dream house as reality.
This organization collapsed because various South Australian home owners left with different
half built homes. There is appointing of different administrators and 20 staff advised related to
collapse. There is presence of stiff competition to operate in residential construction sector and
generally, it is difficult economic climate with context of South Australia with builders
perspective.
The main reason behind this collapse was decrement in sales and its outcome was cash
flow crisis. Approximate 36 homes in different stages of construction and 173 tradies remained
left in lurch through collapse and owned $1.5 million. Over $3.5 million was owned to multiple
secured auditors and $1.5 million with context to unsecured creditors where staff entitlements is
not yet finalised (Cara Waters, 2019). Even its website has shut down along with holding site in
its place where business unit is in statement of administration with context of best interests to all
its creditors. This decision is undertaken with great personal anguish but not on least aspect.
Further, it is extracted that South Australian housing sector is on very critical position where
construction business has aim for building homes for community and directly drowning in paper
work.
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APES 110 Code of ethics for professional accountants
The APES 110 Code of ethics for professional accountants are issued through with all
other accounting professional and ethical standards. The members which are practicing abroad
and in Australia should always comply with code until they are prevented through performing
applicable regulations along with legislation. The conceptual framework of this code has
requirement of members with application of professional judgment for determining threats to
compliance along with fundamental principles. Applying safeguards for substituting threats or
decreasing at acceptable level and evaluating significance of determined threats. The ethics of
this code are:
 Integrity: With context of every professional and business relationship should be
straightforward and honest as well.
 Objectivity: It specifies for not allowing conflict of interest, bias along with undue
influence of others with context of overriding business and professional judgments.
 Professional competence and due care: The professional knowledge and skill at the
level should be maintained and required for purpose of ensuring that employer or client to
gain competent professional service on basis of current developments in practices,
legislation and techniques and to act diligently as per applicability of professional and
technical standards.
 Confidentiality: For respecting confidentiality of information acquired with outcome of
business and professional relationships and not to disclose any information to third party.
 Professional behaviour: To direct comply with relevant laws along with regulations and
avoiding action which discredits the profession (AN OVERVIEW OF APES 110 CODE
OF ETHICS FOR PROFESSIONAL ACCOUNTANTS, 2019).
Corporate governance issue
Aluminum Boats Australia
Furthermore, this company was performing very well and there was increment in 25%
about staff members and pressure was raised with reference to cheap imports challenging
Australian-made vessels. It has multiple issues such as cheap imports through Taiwan, China,
Malaysia and Italy and US with very few people ability for keeping imported crop to introduced
in country. The comprehensive investigation for cause of fire has commenced on immediate
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aspect and culminated into voluntary liquidation. HMAS Bundaberg has decommissioned
through Royal Australian Navy service at short ceremony on 18 December 2014.
As this incident was unfortunate and first time in 15 year of sterling history which
reflected retrofit and construction of different classes of leisure, ferries, offshore and cruise work
vessels which are still in applications. Aggregately, it is core expertise for lifetime training,
support, designs and components incorporated all techniques of shipbuilding. The realization of
valuable knowledge infrastructure, collective intellectual potential and design of ABA where
learning through lapses forced for voluntary administration. The investors group had approached
all administrators and obtained intellectual property of Aluminium boats Australia,
unencumbered through absence of financial liability. As this is view for purpose of repositioning
itself towards huge diversification by laying special emphasis internationally, through
specialized manufacturing fostering dependency on procurement of public such as defence over
international markets.
It has liquidated itself on voluntarily aspect which is self imposed dissolution and wind
up of company which is totally approved through shareholders. It is not ordered through court
but decision through leadership because of losses related to fire in Aluminium boats Australia.
The construction of sound management along with its legal team has varied with expertise
related to construction sector. The management has multiple strategic plans for purpose of
building capacity and to focus and diversify on niche global markets.
HIH Insurance
The organisation faced various corporate governance issues which lead to the collapse of
the company. HIH insurance faced issues due to poor corporate governance due to gross
mismanagement, unsupervised delegation of authority, extensive and complex reinsurance
arrangements, reserve problems, fraud reports, greed, incompetence etc (Sun and Al Farooque,
2018). These were the issues of corporate governance which lead the firm towards liquidation.
HIH insurance faced these problems as it have a complex structure in which there are many
subsidiaries. These problems lead the organisation in provisional liquidation as the firm was not
able to pay its debts as they fall due.
HIH insurance called of provisional liquidation which is a part of corporate insolvency
laws In which the provisional liquidator is appointed which takes the control of company from
its directors (IN THE MATTER OF HIH INSURANCE LIMITED (IN LIQUIDATION) & ORS
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[2016] NSWSC 482, 2016). HIH insurance goes into provisional liquidation as the firm become
insolvent and was not able to pay its claims to its credits and was having its liabilities more than
its assets (Kotb, Halabi and Elbardan, 2018). The organisation was liquidated due to its inability
to pay its liabilities which were the main reason for its liquidation. The company also mislead the
shareholders in the market and thus the market was showing the inflated value of the HIH shares.
Stellar Homes
There are multiple factors which lead to appointing voluntary liquidation such as demand
in building market had rapid decrement through expiration in December 2013 with Government
building grant. There was significant construction delay related to weather in early 2014 and
under-quoting with attempt for securing client contracts. In the similar aspect, there was serious
illness related to key personal and secured creditor agreement with too many restrictions for
purpose of allowing funds to be borrowed where company is cash starved (Giuseppe Tauriello,
2018).
Liabilities
Aluminum Boats Australia
It would be substantial proposition for long term perspective and encouraged through
export backed credit facilities for boosting Australian exports in emerging markets (Paigr
Carfrae, 2019). The commercial and naval shipbuilder has demotivated their staff which led to
uncertainty over business's financial viability. Its downfall was not because of liabilities as
HMAS Bundaberg was replicated as catalyst.
HIH Insurance
It can be said that liabilities were the major reason for HIH insurance downfall as the firm
get into provisional liquidation due to its inability to pay the liabilities. HIH insurance was not
having enough fund for its operations which lead to the downfall and the company was not able
to settle the claims of its creditors (Fernando, 2018). HIH insurance has estimated deficit of
assets over liabilities equal to 5 billion dollar in the total balance sheet of 7 billion dollar. HIH
insurance became insolvent due to its inability to pay its obligations to its creditors which lead
the company towards insolvency.
Stellar Homes
With this context, action has been undertaken such as facilitation of sale with majority of
ongoing, future and preliminary contracts. The consideration of sales are intellectual property
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along with majority of assets of business unit. Further, extension of convening period is for
allowing director to additional time for formulating and elaborating deed of arrangement of
business unit. In respect to outcome, multiple home owners transferred for renowned builder
with following sale of business which provided home owners for accessing higher quality builder
and allowed for their home to be finalised. Ultimately, organization fell for liquidation as it
allows employees for immediate access to Fair Entitlements guarantee scheme and providing
liquidators with various opportunities for recovering funds for unsecured creditors permitted in
deed of company arrangement scenario.
RECOMMENDATIONS
CONCLUSION
From the above study it has concluded about liquidation of Aluminium Boats Australia,
HIH insurance and Stellar Homes. This assignment has provided with reasons due to which the
organisation was liquidated which has provided with the understanding that American Boats
Australia was liquidated due to fire event. HIH insurance was liquidated due to Insolvency which
led the firm towards provisional liquidation. Also, Stellar Home was liquidated due to the cash
flow crises in the organisation. This assignment has also provided with APES 110 Code of Ethics
for professional accountants.
Moreover, it has provided with Corporate governance issues which lead to the collapse of
these companies In this context, it should consider issues such as mismanagement, financial
problems, lack of integrity, complex structure, fraud etc. Furthermore, it will impact the business
operation and lead to the collapse of organisation. In addition to this, it should provide
understanding about the type of liquidation which the companies called which provided that
American Boats Australia's called voluntary liquidation. HIH insurance get into provisional
liquidation and Stellar Homes get in to Voluntary liquidation.
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REFERENCES
Books and Journals
Fernando, M., 2018. ETHICS, VALUES AND RESPONSIBLE LEADERSHIP. Leadership:
Regional and Global Perspectives. pp. 99.
Hsu, P. H., Moore, J. A. and Neubaum, D. O., 2018. Tax Avoidance, Financial Experts on the
Audit Committee, and Business Strategy. Journal of Business Finance and Accounting. 45.
(9-10).
Kotb, A., Halabi, H. and Elbardan, H., 2018. The auditor‐to‐client revolving door: A structured
literature review. International Journal of Auditing. 22(3). pp.464-485.
Schneider, A., 2018. Financial expertise on audit committees of loan applicants: a research note
to test the effects on lending decisions. Accounting and Business Research. 48(2). pp.225-
235.
Sun, L. and Al Farooque, O., 2018. An exploratory analysis of earnings management practices in
Australia and New Zealand. International Journal of Accounting & Information
Management. 26(1). pp.81-114.
Online
ALUMINIUM BOATS AUSTRALIA IS UNDER A NEW MANANGEMENT. 2019. [Online].
Available through <https://www.aba-global.com/news>.
AN OVERVIEW OF APES 110 CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS.
2019. [Online]. Available through
<https://www.apesb.org.au/uploads/meeting/board_meeting/24112014043919_agenda-
item-16-f-cpa-australia-s-overview-of-apes-110.pdf>.
Cara Waters. 2019. Construction company collapses owing $5 million. [Online]. Available
through <https://www.smartcompany.com.au/finance/construction-company-collapses-
owing-5-million/>.
Giuseppe Tauriello. 2018. Custom home builder Stellar Homes has gone into administration.
[Online]. Available through <https://www.adelaidenow.com.au/business/sa-business-
journal/custom-home-builder-stellar-homes-has-gone-into-administration/news-story/
a8903cbc8762cae1a67d6f43e4d27fa8>.
HIH Insurance. 2015. [Online]. Available through :<http://www.hih.com.au/>
IN THE MATTER OF HIH INSURANCE LIMITED (IN LIQUIDATION) & ORS [2016] NSWSC
482. 2016. [Online]. Available through :<https://insurance.moray.com.au/publication/in-
the-matter-of-hih-insurance-limited-in-liquidation-ors-2016-nswsc-482/>
Paigr Carfrae. 2019. HMAS Bundaberg fire blamed for Brisbane-based Aluminium Boats
Australia going into voluntary administration. [Online]. Available through
<https://www.couriermail.com.au/business/hmas-bundaberg-fire-blamed-for-
brisbanebased-aluminium-boats-australia-going-into-voluntary-administration/news-
story/ebe81d71762d198f65b28d674c4c463b>.
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