Consider the following scenario with regard to APES 110 Code of Ethics for Professional Accountants:

You have a small accounting business in your home town. A few years ago some of your school friends started a successful and fast-growing company. Being a trusted local, they engaged your business to prepare year end financial reports and tax returns. The business had started with only a few employees but now has a workforce of 80.

Due to your close relationship with the directors of the company (who are also its owners) and several of its staff, you become aware that staff purchases of goods manufactured by the company are authorised by production managers, and the sales are not recorded in the accounting system. The proceeds from these sales are used to fund the companys Christmas party, which you are invited to each year.

Required:

a) Identify any at risk ethical principles with justify with reference to facts of the scenario (3 Marks).

b) Suggest all possible appropriate courses of action that you could take as an accounting professional (3 Marks).