Question 1 ABC Plc is an international company based in Ghana which trades principally in West Africa and Eastern Europe. In its published Code of Ethics, ABC Plc has committed itself to being a company that will trade fairly and sustainably'. ABC Plc has been following an expansion strategy which has led to the following three situations occurring Situation / At a recent presentation to investment analysts and financial journalists, ABC Plc's Chief Executive Officer (CEO) gave a very optimistic forecast for the company's future, suggesting that revenue would double over the next three years and profits and dividends would increase by 50%. However, the CEO had prepared his forecast in a hurry and had not had it confirmed by anybody else within ABC Ple. He did not mention that ABC Ple's home Government was considering taking legal action against ABC Plc for underpayment of excise duties and had made a claim for large damages. If this claim was to be successful, it would materially affect ABC Ple's profit in the next year (2019). Situation 2 In connection with the legal case in 1, ABC Ple's home Government had obtained a court order that all documents relating to ABC Ple's export trade should be made available to the Government's lawyers. However, many of the documents covered by the court order were the subject of confidentiality agreements between ABC Plc and various entrepreneurs. These documents included details of patents and processes with a high commercial value and if knowledge of these became public it would destroy some of ABC Ple's competitive advantage. Situation 3 This situation, which is unconnected to situations 1 and 2, has also occurred. ABC Plc has a joint venture agreement with a company, QRS Ple. Under the terms of the joint venture agreement each company has to make regular returns of financial performance to the other. QRS is always late in making its returns, which are usually incomplete and contain many errors. QRS's accounting staff are very reluctant to co- operate with ABC Ple's accounting staff and the working relationship between the two companies is poor. ABC Plc's financial controller has been involved in a review of the joint venture with QRS. Due to the many problems that QRS has caused him and his staff he has advised discontinuing the joint venture. Required (a) Advise, giving your reasons, whether each of the three situations is in conflict with the International Federation of Accountants (IFAC)'s Code of Ethics (i) Situation 1 (ii) Situation 2 (iii) Situation 3 (b) Advise ABC Ple of the stages of a procedure it could use to resolve ethical conflicts. (c) Recommend, giving your reasons, TWO current ethical issues, other than those contained in IFAC's Code of Ethics, that could be included in ABC's Ethical Code. (Total = 20 marks) Question 1 ABC Plc is an international company based in Ghana which trades principally in West Africa and Eastern Europe. In its published Code of Ethics, ABC Plc has committed itself to being a company that will trade fairly and sustainably'. ABC Plc has been following an expansion strategy which has led to the following three situations occurring Situation / At a recent presentation to investment analysts and financial journalists, ABC Plc's Chief Executive Officer (CEO) gave a very optimistic forecast for the company's future, suggesting that revenue would double over the next three years and profits and dividends would increase by 50%. However, the CEO had prepared his forecast in a hurry and had not had it confirmed by anybody else within ABC Ple. He did not mention that ABC Ple's home Government was considering taking legal action against ABC Plc for underpayment of excise duties and had made a claim for large damages. If this claim was to be successful, it would materially affect ABC Ple's profit in the next year (2019). Situation 2 In connection with the legal case in 1, ABC Ple's home Government had obtained a court order that all documents relating to ABC Ple's export trade should be made available to the Government's lawyers. However, many of the documents covered by the court order were the subject of confidentiality agreements between ABC Plc and various entrepreneurs. These documents included details of patents and processes with a high commercial value and if knowledge of these became public it would destroy some of ABC Ple's competitive advantage. Situation 3 This situation, which is unconnected to situations 1 and 2, has also occurred. ABC Plc has a joint venture agreement with a company, QRS Ple. Under the terms of the joint venture agreement each company has to make regular returns of financial performance to the other. QRS is always late in making its returns, which are usually incomplete and contain many errors. QRS's accounting staff are very reluctant to co- operate with ABC Ple's accounting staff and the working relationship between the two companies is poor. ABC Plc's financial controller has been involved in a review of the joint venture with QRS. Due to the many problems that QRS has caused him and his staff he has advised discontinuing the joint venture. Required (a) Advise, giving your reasons, whether each of the three situations is in conflict with the International Federation of Accountants (IFAC)'s Code of Ethics (i) Situation 1 (ii) Situation 2 (iii) Situation 3 (b) Advise ABC Ple of the stages of a procedure it could use to resolve ethical conflicts. (c) Recommend, giving your reasons, TWO current ethical issues, other than those contained in IFAC's Code of Ethics, that could be included in ABC's Ethical Code. (Total = 20 marks)
