EXHIBIT $1$

The finance director of crescent Co had asked the previous financial manager to extend the useful lives of both computer hardware and software, from five to seven years, as well as increase the residual values for some of the assets within each class. He told the accountant that it has been a while since management considered the useful life of assets and in management$$s judgment not only are these assets lasting longer due to advances in technology but they are also worth more at the end of their respective accounting lives. He added: $$These revised judgments should have been made sooner, the uplift in asset values should be reflected in equity in the OCI reserve.$$ Both assets are measured on the cost model.W EXHIBIT $2$

The finance director is an executive director on the board of directors of Moon Co$.$

Moon Co is Crescent Co$$s largest supplier of manufacturing materials.

Noticing that there is no disclosure in the notes to the financial statements for the year ended $31$ December $2003$ regarding related parties, the previous accountant asked the finance director why there was no mention of this relationship or these transactions.

The finance director responded that no disclosure was necessary, as Crescent Co receives better deals doing business with Moon Co than with any other suppliers manufacturing materials. He feels that if this were to become widely known, there would be more competition for business with Moon Co which would not be in the best interest of Crescent Co$$s shareholders who are the primary stakeholders.

ith Reference to the background information provided in both EXHIBITS $1$ AND $2$ above:

Discuss any ethical concerns you may have with the finance director$$s actions. Your discussion should include the following:

$$ What could contribute to the finance director wanting to behave unethically.

$$ Identify and discuss why the finance director$$s actions may be unethical for both exhibits.

$$ State any threats evident and which fundamental principles of the ACCA$$s Code of ethics and conduct are being violated for each of the above exhibits $($where applicable$).$

$$ Discuss any safeguards you as the financial manager can apply to reduce your threat to an acceptable level