TACC601 Principles of Accounting: Ethics and Governance Case Study

This case study assignment delves into ethical dilemmas within accounting practices, specifically focusing on the impact of bonus incentive schemes on financial statements and the ethical considerations surrounding computerized shipping documents. The analysis identifies key stakeholders affected by unethical actions, such as customers, employees, governments, investors, and suppliers. It scrutinizes the justification behind decisions to understate profits for government allowances and the ethical implications of deferring revenue and accruing unnecessary expenses. Furthermore, the study explores the responsibilities of accounting professionals like Lucia in maintaining ethical standards. The second case examines ethical issues related to the manipulation of computerized shipping documents, the misuse of power, and breaches of confidentiality, suggesting corrective actions for keyboard operators and management. Desklib provides this document and many more solved assignments to help students.

Principles of Accounting

TABLE OF CONTENTS
THE IMPACT OF BONUS INCENTIVE SCHEME ON THE FINANCIAL STATEMENTS....3
Stakeholders Identification.........................................................................................................3
Justification for the actions taken................................................................................................4
Ethical issues in the situation......................................................................................................4
Lucia deferring revenues and accruing as many expenses possible and still be ethical.............5
COMPUTERISED SHIPPING DOCUMENT................................................................................5
Stakeholders in the present situation...........................................................................................5
Ethical issues involved and action taken by keyboard operator.................................................6
In case of keyboard operator action taken to prevent the present situation................................7
REFERENCES................................................................................................................................8

THE IMPACT OF BONUS INCENTIVE SCHEME ON THE FINANCIAL
STATEMENTS
Stakeholders Identification
The stakeholders of Vroom Ltd are the individuals and groups which have to help the
company meet its strategic objective with the contribution of the experience and perspective
towards the project. The following are the identified stakeholders which are considered to have
interest in the business of the organization in one way or the other (Pandey, Sardana and Gupta,
2021).
Customers:
In this situation the customers of the organization cannot be effected directly. However,
the customers can get effected due to the fraudulent activities such as the deferring the business
profit. The customers of an organization are loyal to it due to the image which they have
developed. Such fraudulent activities can cause the image of the business to get reduced resulting
in loss of customers.
Employees:
The employees of the organization such as Lucia has some standards, rules and
regulations as an accountant which it wants to maintain. The manager telling Lucia to defer the
profit of the organization is breach of the accounting standards, rules and policies which is the
duty of Lucia (Kivits and Sawang, 2021).
Governments:
Government are usually the secondary stakeholders however in this scenario the
organization is provided allowance from the government from employing and training the
apprentice mechanics. Thus, in this scenario government is heavily effected as the business is
deferring its income in order to gain the allowance government provides to the business. This
amount provided by the business is tax-free and is direct fund for the mutual benefit of both
organization and social welfare planned by the government.
Investors:
The investors of the organization will also be effected due to these actions as they are the
person which are effected a lot from the business of the organization. They are the one which
makes their investment decision-making on the basis of the profit of the organization. Deferring
the profit will affect the decision-making of the investors.

Suppliers:
The suppliers of the company also expect from the company that they can be profitable
from the goods they have purchased (Heydari and et.al., 2018). Thus, deferring the payments can
also effect the relationship with the suppliers and vendors.
Justification for the actions taken
In the given case scenario, the Vroom Ltd is the organization in which the Lucia the
accountant has been suggested by the manager to understate its profit. The reason for the
understating of the profit is government allowance which the company received for the training
apprentice mechanics and also the employee them. The allowance the company received was
$100000 per year. Now due to the increase in the profit of the company for the tried consecutive
year at $3.5 million. The government has decided to stop the funding. This is the reason due to
which the manager suggested Lucia the accountant to defer the profit in the business. The
manager got bonuses on the additional profit which the business made thus, the decision made by
the manager is not selfish and is for the organizational benefit.
Ethical issues in the situation
In the present case scenario, the ethical issue is that just to have the grant provided by the
government, the company is deferring recognition of the revenue and cost. This is not good on
part of the company as they are not undertaking any ethical working and this will affect the
sustainability and ethical working practices. Hence, it is essential for the business to not
undertake the business practices which are not ethical and which will result in ineffective
working practices. The reason behind this fact is that in this situation, government was providing
grant of $100000 and in case the company will earn good amount of profits then this grant will
be cancelled. Hence, in order to not create this situation, the company is planning to defer the
revenue and to reduce the profits. This is done so that profit of company does not increase and
they will be getting the grant from government. Hence, in this was the major ethical issue which
the company was facing relating to ethical working (Dion, 2017).
In addition to this, another ethical issue which the company is facing currently is the
professional behaviour. This is pertaining to the fact that deferring the revenue is not an ethical
behaviour and this is being violated by the company. this is not at all good practice for the
business as being working in the corporate world they are not working in professional manner.

Hence, this will affect the overall working of the company and will not be resulting in ethical
working.
Lucia deferring revenues and accruing as many expenses possible and still be ethical
In the present situation, Lucia is deferring the revenue and against that they are accruing
the expenses and this is not ethical. Thus, Lucia cannot defer these revenues and accrue different
expenses in order to reduce the profit. Hence, the company cannot continue with this practice of
working in unethical manner as this is not allowed by the company and also the standards of
accounting does not provide such kind of practice (Emmerich, 2018). The accounting standard is
the one which provides the companies a way of working in proper and effective manner. The
reason pertaining to the fact is that these standards are applicable to all the companies as a whole
and they have to comply with these standards in proper and effective manner.
The standards also state that ethical working is very essential for the effective and
successful working of the company and managing its accounts. This is particularly because of
the reason that when these standards are not followed then there is possibility that company
might follow some wrong practices and due to this, accounting may be affected. Hence, it is very
crucial for Lucia that they do not undertake the practice of deferring the revenue as this is not at
all ethical. Thus, in this present situation as well the deferring revenue was not good and this
practice is not supported by the company and other accounting standards.
Along with this, the government is also providing grants to the company and in case
company will be working in unethical manner then this will affect overall working of the
company. the reason pertaining to the fact is that government can also evaluate and examine the
financial statements of the company before providing grant to business. hence, at this time
government can evaluate the actual position and can also identify that company is deferring the
revenue and accruing unnecessary expense in order to reduce the profit so that they can avail the
grant from government.
COMPUTERISED SHIPPING DOCUMENT
Stakeholders in the present situation
Stakeholder of the company are the people who are interested within the profitability of the
company and other working as well. these are the people who are well- wisher of company and
wants that company will grow and work in effective and efficient manner. The reason pertaining

to the fact is that the stakeholder that is both internal and external are necessary for the company
to get successful (Hurlbut, 2020). The reason pertaining to the fact is that without stakeholder the
company cannot operate in a competitive environment. The major stakeholder present in present
case scenario of Fremantle Fisheries are as follows-
 Employees- this is the major stakeholder of the company and without these the company
cannot work in proper and effective manner. The reason pertaining to the fact is that
when the employees will not be efficient then this will be affecting the overall working of
the company. the major employees of the company are keyboard operator and John
Dorey and also includes over employees as well. all the actual working of the company is
being undertaken by the employees and top management just decides for the policies but
these policies are implemented by employees. Hence, it is essential for the company to
keep this stakeholder segment happy and satisfied.
 Supplier- this is another type of stakeholder which is very essential for the business
because if the material will not be available then this will affect the operational efficiency
of the company to a great extent. The major supplier in the present scenario is the Fish
Marketing board through which the material is being supplied.
 Government- this is another key stakeholder within the company and this also affects the
company to a great extent. In the present case as well government plays a crucial role as
government analyses the viability and profitability of company in order to assess tax from
the company.
 Shareholders- this is another group of stakeholder which are also essential for the
successful working of the company. the reason pertaining to the fact is that shareholders
are the one which invest their money within the business. Hence, it is very crucial for the
business that in case the shareholders will not be satisfied then overall working of
company will be affected. In the present case of Fremantle Fisheries, the shareholders are
the owners of the company who have invested their money and efforts into the operations
of the company.
Ethical issues involved and action taken by keyboard operator
The major ethical issue present within the case scenario of Fremantle Fisheries is that
John Dorey has influenced the newly appointed keyboard operator to print only information
which is being suggested by him and not present in document (Kirwan, Maye and Brunori,

2017). This results in manipulation of the data and this can affect the overall working of the
company and will be resulting in loss for business. hence, this was the major issue which was
being faced by the company and this affected the working of the company to a great extent.
Along with this, another major ethical issue which is being faced by the company is
misusing of the power of person. In the present situation, John Dorey is undertaking the use of
their power and is being instructing the new accountant to use wrong practices. Here John Dorey
is misusing his power and this will be affecting the overall business practices and output of
company. Along with this also the confidentiality of the documents is not maintained within the
company. the reason pertaining to the fact is that the company is not working in ethical manner
and because of this the business operations are not in ethical manner.
In case of keyboard operator action taken to prevent the present situation
The management of this ethical issue is very necessary and for this correction action need
to be taken by company and the keyboard operator as well. In case of the keyboard operator the
major action that need to be taken is that they must first take consent from Dorey and then use
the names. This is particularly because of the reason that accountant is already knowing that
these codes belong to his boss family and then also they are being used. Hence, it is necessary for
him to get consent from Dorey.
Along with this another action which accountant can implement is to discuss this
situation with that to the owners and top management (Salman and Laouisset, 2020). The reason
underlying this fact is that when the he will communicate this compulsion with top management
and owner then this will assist him to find some solution to the problem and work in effective
manner. In this manner the issue of unethical practice will be removed and effective ethical
practices will be promoted within the organization.

REFERENCES
Books and Journals
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.
Heydari, M., and et.al., 2018. Stakeholder analysis of Iran's health insurance system. Journal of
education and health promotion, 7.
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.
Kivits, R. and Sawang, S., 2021. Stakeholder Analysis. In The Dynamism of Stakeholder
Engagement (pp. 29-43). Springer, Cham.
Pandey, A., Sardana, K. and Gupta, S.K., 2021. Developing a framework for sacred grove
management using stakeholder analysis: evidence from sacred groves in Gujarat,
India. Benchmarking: An International Journal.
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.