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LAW304 - The Ethical and Legal Issues Facing Miller | Governance and Ethics

   

Added on  2020-03-07

11 Pages2657 Words19 Views
Running head: ETHICAL AND LIABILITY ISSUES 1Ethical and Liabilities Issues Facing Miller, Yates, and Howarth. Student’s NameUniversity Name
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ETHICAL AND LIABILITY ISSUES 2Executive Summary This report focuses on the ethical and legal issues facing Miller, Yates and Howarth arising out of its contract with Morgan Fertilisers. Typically, when making decisions, auditors limit themselves to the terms and conditions set out in the contract agreement and the accounting standards and procedures. However, some decisions have ethical elements that impact different stakeholders in different ways. In order to address the ethical challenges, the report uses the American Accounting Association ethical consideration model. The report also analyses the possible legal liability of Miller, Yates, and Howarth for negligence when preparing the audit accounts of Morgan Fertilisers to the new owners of Morgan Fertilisers, Oasis. The report analyses previous court ruling to address some of the questions regarding liability to Oasis a third party.
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ETHICAL AND LIABILITY ISSUES 3Ethical and Liabilities Issues Facing Miller, Yates, and Howarth. American Accounting Association Ethical ModelIn order to determine the course of action with regard to the Morgan Fertilisers and their subcontractor Dumparound Ltd, the American Accounting Association (AAA) ethical model willbe used. The AAA model is the outcome of a report published by Langenderfer and Rockness in 1990 (Association of Chartered Certified Accountants, 2015). The report developed seven logical steps to be followed during the process of decision-making in order to ensure that the final decision takes all ethical factors into consideration.1.Facts Morgan Fertiliser has recently engaged a new contractor (Dumparound Ltd) to handle its waste products. Dumparound Ltd is currently being investigated by the local authorities for the level of toxic waste on its sites.2.Ethical Issues InvolvedThe ethical issue, in this case, is whether Miller, Yates, and Howarth (MYH) should notify its client Morgan Fertiliser about the investigation being undertaken by the local authorities into the activities of Dumparound Ltd. If Dumparound signs the contract with Morgan Fertilisers and the waste is not properly disposed of, then Morgan Fertiliser will face stiff penalties. If MYH notifies Morgan Fertiliser about the investigation into Dumparound, Morgan Fertiliser might cancel the contract. This is despite the fact that the investigation into Dumparound Ltd has not been concluded.3.Rules and Policies in ForceIn Australia, the ethical conduct of accountants developed by the Accounting Professional and Ethical Standards Board (APESB) in 2010 through the APES 100 series requires that the
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ETHICAL AND LIABILITY ISSUES 4accountants act in the interest of the client and also that of the public. The regulations require that the accountant act in compliance to accounting standards, with due care, objectivity, integrity, and professionalism. The auditor is required to identify threats to compliance, evaluate the impact of the identified threats, and develop strategies to deal with or diminish the threat. The decision-making by the auditor should be driven by the actions that an informed third party would take given all the facts, circumstances and compliance.4.Options Available(i)Option1: Inform Morgan Fertiliser about the allegations that have been made against Dumparound Ltd. Ensuring to inform the client that the issues are still under investigation and the possible penalties if the companies waste is not properly disposed of.(ii)Option 2: Do not inform Morgan Fertiliser about the allegations that have been made against Dumparound Ltd. This is because MYH is only concerned with the correctness of the financial statements. 5.Decision that Suits Current PoliciesAccording to the norms, values, and principles required of an auditor, MYH should inform Morgan Farm about the allegations made against Dumparound Ltd. The board should, however, emphasis, that nothing has been proven yet. Additionally, MYH needs to inform Morgan Fertilisers about the likely penalties arising from improper waste disposal.6.Possible Consequences(i)By pursuing option 1, Morgan Fertiliser would probably cancel the contract with Dumparound Ltd. This would probably save them the risk of fines arising from bad waste disposal.
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