Mesh Apparels Ltd., a well-established garments manufacturing and exporting company

where you have joined recently as financial controller, is owned by Habibur Rahman

(40%), Mominur Rahman (35%) and Rashidul Huq (25%). Upon joining you identified that

the company has documentation lacking specially in revenue and payable segments. The

company has various bank loans amounting to Tk. 180 crore but revenue stream does

not match fixed expenses. You came to know that Mominur Rahman who is the

Chairman leads a flamboyant life. A few days after your joining suddenly Habibur

Rahman who was the Managing Director of the company died of cardiac arrest. After

MD's sudden death Mominur took over all executive authorities of the company and

invited Shafa Habib, who is the widow of Habib and who gave her properties as mortgage

against bank loans, to join the company as MD only as a formality merely to sign loan

related official documents.

In the first week after MD's demise, the sales director (Chairman's spouse) brings to you

a cheque in settlement of the account of a major buying house. She explains that the

cheque (which appears to clear the amount due) is in fact an overpayment, as the

balance showing on the sales ledger is before allowing bulk discount (which is calculated

retrospectively). The sales director shows you her calculations and the agreement as

authorized by the board. The sales director states that the buying house's Managing

Director has come to collect the discount in cash. She says that this is not an unusual

occurrence for some of the company's better parties. It helps to maintain a good

relationship with those parties, which leads to purchasing loyalty. Another benefit of this

arrangement is that it gives the sales director regular face-to-face meetings with the

senior staff of those parties. It also reduces the high charges that the bank makes for

handling cash.

You ask the sales director why the customers prefer to receive a refund in cash, rather

than simply pay the net amount needed to settle the account. She replies that it is not

appropriate for her to question their motives.

In the second week the production manager gave you a panic call that the workers in

the factory started agitation for demand of paying-off their wages and overtimes, which

are pending for last two months. When you talked to the Chairman he advised you to

pursue bank to release more fund to pay the workers. When you talked the bank

manager straight forwardly said that no fund will be released until a trust worthy

Accounts Receivables list is submitted to the bank. You also received a call from

warehouse manager who informed you that there is significant mismatch between

production data and actual physical inventory at the warehouse. At this issue your

chairman advised you to launch an investigation against Rashidul Huq, who was salaried

factory in-charge before being taken as shareholder and director.

The company received a letter from tax authority claiming huge pending tax and penalty.

When you consulted with the company's tax retainer for submitting appeal petition, he

accepted that the company's tax returns were submitted based on fake sales figures and

using tampered vouchers so chances of winning the appeal is bleak.

The above situation led you to seriously confronting with ethical choices and moral

dilemmas in the course of discharging your professional duties.

Question:

In given situation above, what are the main ethical issues & the ethical choices and

moral dilemmas you are confronting? What should be your responses to those ethical

issues as an individual professional accountant?

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