QUESTION 3 [25 MARKS]

You are a newly appointed financial controller of Gouta Pty (ltd) Ltd. The following matters have come to your attention:

1. Your assistant is heavily in debt to a junior member of the finance staff, who has a considerable amount of personal wealth in spite of his fairly junior position in the company.

2. The CEO of the company was in the habit of adjusting the financial statements prepared by the finance director to make performance appear better than what it actually was.

3. A member of your department, another management accountant, recently made significant errors in completing the sales tax returns to the tax authorities, which resulted in a fine and interest charges for an underpayment of the sales tax liability.

Required: In each of the three cases

a. Identify and describe the ethical threats. (9 marks)

b. Describe the actions that can be taken to either remedy the situation or to safeguard against possible future problems. (9 marks)

c. Explain the constraints that may hinder the remedies from your answer in (b) above. (7 marks)