TACC601 Principles of Accounting: Ethical Issues in Two Case Studies

This case study assignment delves into ethical considerations within accounting practices, analyzing two distinct scenarios: Vroom Ltd and Fremantle Fisheries. The analysis involves identifying key stakeholders affected by the companies' actions and evaluating the ethical implications of decisions made by management. In the first scenario, the manager of Vroom Ltd pressures an accountant to understate profits to maintain government funding, raising issues of independence, integrity, and professional behavior. The second scenario examines Fremantle Fisheries, where a former accountant influences a keyboard operator to falsify shipping documents, highlighting unethical leadership and potential violations of government regulations. The study concludes that ethical considerations are paramount in business and emphasizes the importance of transparency and adherence to accounting principles to maintain stakeholder trust and regulatory compliance. Desklib provides a platform to access more such solved assignments and study resources.

Principles of Accounting

TABLE OF CONTENT
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
CASE STUDY 1..............................................................................................................................3
Identification of stakeholders.......................................................................................................3
Analysis of decision-making of manager....................................................................................4
Ethical issues................................................................................................................................4
Can deferring revenues and accruing expenses be ethical?.........................................................5
CASE STUDY 2..............................................................................................................................6
Identification of stakeholders.......................................................................................................6
Ethical issue evaluations..............................................................................................................7
Actions that could have been taken.............................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Accounting principles are rules and regulations which the organization follows for
reporting the financial information. Ethics and governance are the core components of the
knowledge which is based on the skills of the professional accountants. In this project two
different scenarios will be evaluated for answering the financial regulations of the company. This
project will help in the identification of the stake holders from the given scenario. It will help in
analysing the decisions made by the management for the financial information. This project will
also help in the identification of the ethical issue involved in both the scenarios. In this project
recommendations towards the situations will also be done for finding ways of improving them.
MAIN BODY
CASE STUDY 1
Identification of stakeholders
The stakeholders of Vroom Ltd are the people or groups that rely on the financial
information of the organization for making decisions. They have interest in the entity for the
business and are very influential in changing the decision-making of the organization. For this
organization the stakeholders are the following,
Shareholders :
These are the individuals or groups which have invested in the business of Vroom Ltd.
This organization is owned by an internation car firm which owns the shares of this company. As
they have invested their money into Vroom Ltd they are entitled to have interest as they are also
those stakeholders which are at the risk of losing all their money through the business (Kirwan,
Maye and Brunori, 2017).
Employees :

They are people which work for the company and their livelihood depends on their jobs.
In this scenario Lucia the accountant and Freda Cluse both are the stakeholders for Vroom Ltd.
They have more interest than just being employed as it is the road to success for the organization.
The manager of this company also receives remuneration depending on the profit generated in
the company.
Government :
In the given case study the government spends $100000 yearly in Vroom Ltd for training
and employing apprentice mechanics. Thus, the government shows interest in the company as it
is able to decrease unemployment from the job it generates for these mechanics. Government
generally is always an indirect stakeholder as it relies on the business for tax revenue but in the
case study the Vroom Ltd has been seen as the company which can provide development
(Emmerich, 2018).
Analysis of decision-making of manager
This decision was made by the Freda the manager on the basis of company losing out on
$100000 of government spendings. The reason behind this decision-making was the when the
company made $3 million profit the government still provided allowance for the training and
employment of the apprentice mechanics and these spending from the government is more useful
than just investment. The amount which the government spends on a company for the ethical
purpose is totally tax-free for the company. This becomes an added benefit for the organization
which helps the organization to use that amount to generate income (Alazemi and Al Omari,
2020). This is one of the reason why the manager asked Lucia to defer the accounting records.
Understating the profit of the Vroom Ltd company will enable the company to overstate
them in the future. This will provide the organization a cushion for towards the weaker side of
the things. This is very helpful for appeasing the investors and analyst for raising the demand of
the organization stocks. It is considered to be predictable and stable earning. In this scenario the
business will be able to gain the government allowance and will save taxes as well as spending
on training and employment of apprentice mechanics.
Ethical issues
In this scenario were the government is planning to stop the allowance it provided to
Vroom Ltd plc as the profit of the company has increased to $3.5 million. The government
considers that the profit made by the company is more than enough for spending on the training

and employment of apprentice mechanics. Due to this the manager of this company has asked its
accountant to understate records so that the financial profit for the year can be reduced. This is an
ethical issue by the organization because for the benefit of the organization the manager is trying
to lie about the financial records (Hollingworth and et.al., 2021). The following ethical
accounting principles are breached in the given scenario,
Independence and objectivity :
In the accounting profession the ethics and independence both are critical component to
the trust of making unbiased decision and recommendations for benefiting the client. According
to this principle the accountant needs to remain objective and independent for providing
necessary recommendations which are not subjected towards the outside influence. However due
to the influence of the manager which wants to the company to gain the government allowance it
requires.
Integrity :
Integrity suggests the accounting records to be straightforward and honest towards all the
business. Upholding of integrity requires the accountant to not associate themselves with the
information which is false or misleading. This principle is breached in this scenario as
accountant is said to understate the profit.
Confidentiality :
The accounting information should not be disclosed to anyone without the trust as it
violates the foundation of professional relationship (Salman and Laouisset, 2020).
Professional Behaviour :
For the ethics the accounting professionals like complying with the laws and regulations
which governs the jurisdiction of the working body. There are reasons for following this
principle violation of this is against the law.
Can deferring revenues and accruing expenses be ethical?
No, if the accountant Lucia defers the revenues and accrue expenses for showing
minimum profit of the organization it will not be an ethical practice. This is because it will
provide false information about the organization and will result in unethical practices. The
involvement of the government in this makes it even more risky as the accountant may be
accused of its duty of not following the principles. This is the ethical issue of pressuring
someone for the manipulation of the figures in the organization.

CASE STUDY 2
Identification of stakeholders
The stakeholder in this given scenario are the individuals which are effected from the
given scenario. From the definition of the stakeholders it can be understood and identified that
these are individuals and group which have some kind of interest in the organization. For the
given scenario the stakeholders are the people which are effected and must be interested in the
misleading operations which are happening in the organizational scenario. Following are the
stakeholders of the Fremantle Fisheries,
Shareholders :
Shareholders of the company are the stakeholders of the organization as they have
invested in the organization. These are individuals and groups which are at the most risk of any
kind of loss. They are the last one to get the remuneration of in case the company makes any
kind of profit. In the organization loss of money in the event of business shutdown is seen to be
the priority for the remaining funds. In FF, the shareholders are the owners of the fishery which
has it owns all the shares and rights of the company (Alazemi and Alazemi, 2021).
Employees :
In this scenario the employees are also involved as the stake holders of the company. The
business for them is considered to be the main source of income which help them for their
livelihood. The employees also believe that working for Fremantle Fisheries is the road to their
future opportunities. These are the reasons why the employees are the stakeholders of this
organization. In this scenario the keyboard operator which has mentioned the three codes in the
missing shipping documents from the pressure of non-compliance is at the most risk in this
situation. This is because that individual is responsible for utilization of the correct information
in the documents (Stakeholder definitions, 2021).
Suppliers :
The suppliers of are the individuals or group which provide the organization with
resources and raw material for their business operations. In this scenario the suppliers are the
Fish Marketing Board through which the fishes are caught from the ocean. This organization is
established by the government and as a result of which the government involvement is present in
the scenario (Hurlbut, 2020).

Government :
The government in this scenario is involved because the Fremantle Fisheries imports the
fishes from the ports which are owned by the government itself. Thus, the secret codes which
have been entered by the keyboard operator from the influence of John Dorey the former
accountant of that business is ethically acting against the government. The result of this can be
bad for both the organization and the employees as it will result in the organization losing its
viability and trust with the government. It can also cancel the licence of the company for using
false codes in the shipping documents.
Ethical issue evaluations
In this scenario the ethical issue is with John Doery who influenced the newly appointed
keyboard operator to print information suggested to him which were not present in the
documents. These are issues which form up the obvious manipulating number in a report. It is
known as the unethical leadership issue because in the given scenario the Doery who was a
former accountant and now manages a port for this company is making the employee below
make changes in the document which can influence the lack of accountability. The code which
were entered by the keyboard operator were personal information of the owner. This makes the
issue even more ethically fragile.
Another side to this ethical issue is that due to the experience which Doery has in the
accounting department it is possible that he is aware of the codes which are needed to be present
in the document. Thus, because of the experience Doery has it is quite possible that the owners
have strong relations with this employee, and they have shared the information on purpose for
ensuring the business operation does not stop during their absence. It can be said that it might not
be an ethical issue if the owners are aware of the events that have taken place (Dion, 2017). The
keyboard operator did what every thing out of the fear of his own dismissal. However, the source
codes which were entered by the keyboard writer were the names of the Doery's father and two
sisters. This explains that the documents have been sent and recorded falsely previously as well
in the given scenario. Having done that multiple times previously as well Doery has violated the
rules multiple times.
Actions that could have been taken
As the keyboard operator there are few steps which could have been taken against the
ethical issue. The keyboard operator could have taken the consent of the Doery about the use of

the names of their father and two sister in the shipping documents. Taking the consent would
have provided the proof about that the keyboard operator did what he did from the consent of
Doery and not by himself.
The keyboard operator can also inform the owners about what actions are forced him to
take. This might result into a conflict between the Keyboard operator and John Doery but it is
being ethical towards the operations about the legal shipping documents. Utilization of the names
of the family members of the Doery can be very unethical practice which should not be
practised. Those documents might be of great value as these records are saved for future
references.
CONCLUSION
With the help of this project it can be concluded that ethical considerations are very
important factor of consideration for the business. It also explains the stakeholders of the given
scenarios which are going to be effected by the ethical issues which has taken place. In this
project the ethical issues of the case scenarios are explained and analysed. This project also
provides justification for the choices made by the people with poor ethical considerations. This
project also ensures whether the decisions made by the people involved in the issue is ethical or
not.

REFERENCES
Books and Journals
Alazemi, M. and Al Omari, A.M., 2020. The Application Level of Institutional Governance in
Islamic Institutions and Banks in Kuwait. International Journal of Business Ethics and
Governance, pp.85-101.
Alazemi, M. and Alazemi, L., 2021. Transparency Standards Implementation in Light of
Governance in the Islamic Banks in Kuwait. International Journal of Business Ethics
and Governance, pp.106-123.
Dion, M., 2017. Corporate citizenship as an ethic of care: corporate values, codes of ethics and
global governance. In Perspectives on corporate citizenship (pp. 118-138). Routledge.
Emmerich, N., 2018. Virtue ethics in the conduct and governance of social science research.
Emerald Group Publishing.
Hollingworth, S., and et.al., 2021. Research governance authorisation: the next
frontier. Australian Health Review. 45(3). pp.389-392.
Hurlbut, J.B., 2020. Imperatives of governance: human genome editing and the problem of
progress. Perspectives in biology and medicine. 63(1). pp.177-194.
Kirwan, J., Maye, D. and Brunori, G., 2017. Reflexive governance, incorporating ethics and
changing understandings of food chain performance. Sociologia Ruralis. 57(3). pp.357-
377.
Salman, M. and Laouisset, J., 2020. The governance in the corporate excellence model–The 4th
generation model. International Journal of Business Ethics and Governance, pp.71-91.
Online
Stakeholder definitions, 2021[Online]. Available through:
<https://www.accountingtools.com/articles/what-is-a-stakeholder.html>