I need answer for questions 1,2, and 3

Lila Jones had sought out her old friend, Daniel Murphy, to discuss her employment situation. Lila and Daniel had both graduated in 2008 from Mackenzie King University, and then studied together to attain their CMA designations in 2010. Soon thereafter, Daniel was promoted quickly within his division of a large multi-national auto supply company, and now held the position of vice-president/ controller. Lila, on the other hand, had temporarily removed herself from full- time employment in 2012 to raise her young daughter. She kept herself up-to-date professionally and handled the occasional short-term consulting assignment. Six months ago, Lila had re- entered the workforce, her return accelerated by the fact that her husband, David, had been stricken by a debilitating illness. It had surprised Lila somewhat that she was able to land a position quickly as controller and office manager for Deegan Chemical Inc., a small, privately held producer of specialty chemicals used in testing labs and other manufacturing firms. Deegan was a relatively new and growing company with innovative ideas, and Lila was pleased and excited to have had the good fortune to join its management team. Today, however, meeting with her CMA colleague and trusted friend, Lila was troubled. "I don't know what to do, Daniel. I thought I was taking on an ideal position, an emerging company, with flexible working hours, decent pay and a good benefits package to help with David's medical expenses. But the situation sure turned sour quickly. I really don't know who to talk to. In fact, Daniel, I'm not sure that I should be talking to you". "Nonsense,\" said Daniel, I*You know you can count on me after all we've been through together. Tell me what' 5 going on." "'W'ell,'I said Lila, "Initially, things were going very well for Deegan Chemical. None of the larger companies were interested in the small niche market that Deegan had carved out. Sales grew rapidly and, because of our success, Superior, the big integrated chemical conglomerate, set up a subsidiary to compete with us. Since then, we've taken a real hit in sales and prots. Our business is down 30 per cent, and the new plant that we built in Hudson three years ago is operating at 50 per cent of capacity. " "That's certainly not good news,'I said Daniel, I*Have you got your expenditures under control?'I "I gather we were never very good at cost control and internal controls were virtually non- existent. When we were growing so quickly, sales were more important than costs. When things got tough, they dismissed my predecessor and hired me. They told me that I could have free rein to implement whatever I thought was necessary. And boy, are some changes ever necessary! Our senior staff really don't know the difference between personal and corporate spending, and I think our sales and marketing expenses are double what they should be. It will be a challenge to sort that out, but I'm pretty sure I can get this under control. The really big problem that has me worried is our rural development grant." "I don't know a lot about government grant programs," cautioned Daniel, "but tell me more." "When business fell off, Matthew Deegan, our president, attended a seminar on how to get government grants. He discovered that a matching program was available for firms to establish rural manufacturing facilities. So, Matthew and our V.P. of operations submitted a grant proposal for us to manufacture chemicals in Hiawatha, a remote village with about 2500 people, where the mines have been phasing out. The proposal was simply an adaptation of an earlier unsuccessful grant application for our Hudson operations. The government must have been real anxious for someone to locate in Hiawatha, because the new proposal was accepted in a wink this time. Moreover, both levels of government have provided matching funds of $750,000, a total of one and a half million in government money. They also guaranteed a bank loan for us of $750,000, and we used the loan proceeds as our contribution." "Well, that sounds great, Lila. What' s the problem?" "After the funds were provided, we rented a temporary facility in Hiawatha and we hired a few staff there to maintain the building. However, we told the Ministry of Rural Development that the new equipment needed to be tested and the manufacturing process needed to be developed further. So the equipment was delivered to our Hudson facility. The equipment is currently being used there to streamline our manufacturing of a new line of chemicals that should allow us to regain much of the market share we lost to Superior. The problem is that the grant requires us to use the funds in Hiawatha. " Daniel jumped in, "But will anybody check on how the funds are really being used?" "That's what I'm worried about, Daniel. At the present time, one of my tasks is to ensure that optimistic reports are sent about how the development work is coming. In the short run, I could handle this because there was a real need to shake down this new equipment. The supplier had suggested two months, but we have already been 'testing' the equipment for six months in Hudson, and Matthew is hoping that we can continue to 'test' it for a full year." "Well, after the year, they' ll simply move the equipment up to Hiawatha and your problems will be over! " "No, Daniel, that's when my problems will really start. You see, there is absolutely no way that we can turn a profit up in Hiawatha. We would have to transport all the raw materials up there, and then ship the finished product back here. Superior will soon be competing in our new line of chemicals and, even though they don't have our advanced technology as yet, they will be able to beat us on cost because of the transportation factor." "I see. Then you'll have to shut down operations and return the funds?" Lila's reply was terse. "We can't. If we shut down operations here, we don't have enough funds to repay the loan and, apart from Superior, I doubt we could find a buyer for the equipment. Besides, we would be operating below break-even on the balance of our operations]I "Wow! Major problems. Does management have any ideas on how to work things out?" "Well, the size of this new equipment is quite portable as only small quantities of the chemicals are produced in each batch. Matthew would like to ship the equipment to Hiawatha for a startup phase, and temporarily move workers up there from the Hudson plant, while the government publicity photos are being taken. After a discreet period of time, he'll return the equipment to Hudson, and bring the workers back down. We'll continue to 'produce' chemicals in Hiawatha with a few local workers, but the real operations will be here in Hudson. The grant contract states that the company is obligated to produce in Hiawatha for a minimum of three years. 50, Matthew figures that if we can last for two years past the testing period, we will be able to keep the equipment and keep the company viable." "But surely some government audits are necessary, Lila. What will you do then?'I "Believe it or not, Daniel, the only audited statements the government requires are our nancial statements from our external auditors. Matthew figures that the auditors aren't particularly concerned about where we manufacture but, to give the impression of a high level of activity in Hiawatha during the audit, he'll temporarily ship some people and equipment up there. Our auditors don't really know the technical aspects of our business and, as long as we can document all the equipment, labor and inventory, we'll probably be okay with them. One of the things I could do as well is to bill as much of our supplies as possible to the Hiawatha plant and minimize the amount billed through to Hudson. Some of our labor costs down here might even be billed through to Hiawatha when you consider that a few of our Hudson workers will, in effect, serve as consultants to the rural facility. " "Matthew and our VP. of operations will have to submit an annual written report on how the grant is being used, but for my part, all I have to do is contribute a brief statement on the 'testing and setup' along with the financials. I'm hoping that I won't even have to see their finished report!" "Gee, Lila, I can see why you've got a bit of a worry here," Daniel injected. Lila continued, "Matthew and the other senior managers tell me not to worry. They say that everybody does this for tax reasons. They also gure that nobody could really operate a manufacturing facility in Hiawatha anyway, because suppliers and markets are just too far away. They speculate that training costs alone up there could blow our grant budgets and, you know, I agree with them that the government just wants to wave the flag a little bit for votes. Besides, we are giving a few local people employment as custodians of the rural plant, and we are managing to keep Deegan Chemical afloat during this tough time. Matthew is also particularly miffed that Superior got a major government supply contract away from us, and argues that this government grant merely puts us back on a level playing field." "Daniel, I'm really bewildered here. On the one hand, as I think about it, the financial statements will be perfectly accurate and consistent with previous years, so I don't believe that anyone could nail me on an ethics question there. But I did sign a very restrictive employment contract (see insert) that states that I can't talk to anyone. I've violated it already by talking to you, and of course David. And I'd surely be violating it, and perhaps my professional code of ethics, if I talked with the government. Heaven knows that David and I need the money and Omega's health care package, and there are 60 other em loyees in H dson that need their jobs too. I'm havin 1". I 4' I -. I I ' 4' I'm told: In all other aspects, this could be a great job and, if we pull this off, Matthew says he'll cut me in for equity participation. IfI quit, it won't be easy to get another job and you can be sure that Matthew would not be helpful in getting me placed." Employment contract, Deegan Chemical Inc. The Employee expressly covenants and agrees that he / she will not, at any time during or after his / her employment with the Company: a) Reveal, divulge or make known to any person, firm or corporation, the contents of any formula, chemical compound, product or other substance owned or developed by the Company; or the method, process or manner of manufacturing, compounding or preparing any such formulae, compounds, products or substances; or sell, exchange or give away, or otherwise dispose of any formula, compound, product or substance now or hereafter owned by the Company, whether the same shall or may have been originated, discovered or invented by the Employee or otherwise; b) Reveal, divulge or make known to any person, firm or corporation, any secret or confidential information whatsoever, in connection with the Company or its business; or anything connected therewith; or the name of any other information pertaining to its customers or suppliers; c) Solicit, interfere with or endeavor to entice away from the Company, any customers or supplier or any other person, firm or corporation having dealings with the Company; or interfere with or entice away any other officer or employee of the Company. Reference: Adapted from: htggs,uwaterlooggcenire@r-accounngethicsresourcesemics-teaching- casesgethicaI-temgemturearticview REQUIRED: Using either the Statement of Ethical Professional Practice issued by the Institute of Management Accountants' (IMA, 2017) or The Code of Ethics for Professional Accountants published by CIMA (2017), to produce a written memorandum that addresses the following questions: 4 1. Determine whether there is an ethical issue for you in this scenario. Within your answer apply the Code's fundamental principles/ standards (i.e. integrity, objectivity, competence and confidentiality) to the case data and explain whether each is relevant for determining Lila's ethical position. 2. Identify the relevant stakeholders and state how they are impacted by the issue. 3. Briefly discuss the range of solutions that Lila could use to resolve the situation and explain the most appropriate course she should adopt. References: IMA (2017) Statement of Ethical Professional Practice, Montvale: IMA, Available from: https:/ /www.imanet.org/-/media/ bofbeeb74d964ebc9fe654c48456e61f.ashx, [Accessed July 15, 2019] Also see the "Role of Ethics in Accounting and Business" in Chapter 1 of the Warren et al textbook. CIMA (2017) Code of Ethics for Professional Accountants, London: CIMA, Available from: https://www.cimaglobal.com/ Documents/Ethics/CIMA%20Code%20of%20Ethics %202017.pdf [Accessed July 25, 2019] The Code's fundamental principles are outlined on page 4. CIMA also provides an ethical checklist when applying its Code: http://www.cimaglobal.com/Global/Images/standards-and- ethics/ ethics_checklist web June2015_update.pdf Please see the submission requirement on the next page:Submission requirements: - This is an individual submission. - Prepare a cover page to include the title of the memorandum, Course name, CRN and your full name - Font size should be 11 or 12, line spacing 1.5 and use proper headings and sub-headings where required (you may refer to the \"Criteria" provided in the table below to organize your headings/sub-headings). - Submit an electronic copy of the memorandum (of no more than two pages of letter-sized paper) in Teams that provides a summary of your answers to the questions above. See the syllabus for submission deadline. - Memorandum should follow the outline \"Ethics memo student guidelines for writing.docx\