Adam Smith, a recently qualified accountant, was appointed to the position of Finance Controller of Rep Ltd on the strength of his CV and a 30 minute interview with Joyce Rep, the Finance Director and a close family friend. The new role provided a significant increase in salary and employment benefits for Adam and included specific responsibility to oversee the completion and submission of all VAT and corporate tax returns. Adam had exaggerated his experience on his CV and did not have the technical expertise to do the role he was employed for, but did not want to let the close family friend down and as he always considered himself a fast learner and able to talk himself out of trouble he did not consider his lack of technical skills and experience to be a problem.

Following the submission of an incorrect VAT return and resulting penalty, Joyce Rep asked if Adam wanted to attend specific training. Adam did not want to lose face so he refused the training, blamed the mistake on a junior assistant accountant, and continued to submit returns in the hope that any errors would not be spotted by HMRC. Unfortunately for Adam, there were late submissions and further errors on subsequent VAT and corporate tax returns, and Adam was forced to leave the company by mutual consent.

Requirement

Identify and explain
• the fundamental ethical principles;and

• the threats to those fundamental principles

that Adam Smith faced and breached in his appointment and in his role as financial controller of Rep Ltd.

Nb Explanations must relate and include facts of the scenario. No marks are awarded for simply defining the fundamental principles and defining the threats to those principles.