Professional and Ethical Behaviour-Ethics Relating to the Recording of Property, Plant, and Equipment and Weaknesses in Internal Controls You have just accepted a job working in the accounts payable department at IEM Limited. IEM is one of Canada's largest IT and consulting companies. IEM sells computer-related products, such as computers, printers, and tablets, and other business-related items, but also offers consulting services to assist smaller companies looking to start a new business. Recently there has been a decline in the growth of business at IEM. In fact, sales have been declining by a considerable amount over the last three years. Pressure has mounted on IEM to show a better bottom line as investors have been worried about the decreasing sales and lower net income.

During your first month at IEM, yөu make it a point to get to know everyone in your department. Four people work in accounts payable. You were hired to take over Joe's position. Joe worked for the company for 20 years and has recently retired. You report directly to Pat, supervisor of the accounts payable department.

You have been working under Pat's supervision since you started. Pat recently told you that he was looking forward to finally taking his two-week holiday with his family. He was worried at first that he wouldn't get his bonus to pay for the trip, given that it looked as though the net income on the statement of earnings wouldn't meet the targets required for a bonus payout. He was happy when it actually did.

Pat told you not to worry about anything while he was away, as he'd take care of everything when he returned. In fact, he told you to take a week's vacation if you liked. You thought that was strange as you had only started a month ago. He told you that you were doing a great job and he liked how motivated you were.

One month later, with Pat away, you decide to impress your boss by attempting to do as much as possible in the department. As you start to review all available documentation, you realize that several invoices for equipment bought by IEM were all recorded as capital items on the statement of financial position; however, no depreciation has been taken on these items all year, despite the items being used in the business. You recall from your accounting courses that if a capital item is used in the business, it should be depreciated.

You start to dig deeper and notice that documents for the items that were recorded in the financial statements, such as invoices and cheques showing payment of the items purchased, have only one signature on them, and the signature is Pat's. You recall from the policy manual provided to you on your first day at IEM that it's company policy to have two signatures for all items that are purchased and paid in the accounts payable department, especially if the item costs over \(\$ 10,000\). Clearly this is not being followed. After further research, you realize that some of the equipment recorded on the statement of financial position is very old, and you are wondering why it was never written off.

You cannot wait for Pat to return from his trip to question him on the discrepancies you have noticed.

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Identify and discuss any accounting issues and potential ethical issues.

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