Good Life Diary Company Limited Ethical Issues
Essay by Wu Yue • March 20, 2018 • Essay • 1,006 Words (5 Pages) • 1,302 Views
HONG KONG SHUE YAN UNIVERSITY
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ACCT 450 Professional Ethics Individual Assignment
Topic: Good Life Diary Company Limited Ethical Issues
Professor: Dr. ZHOU, Qiang
Section: 4
Written by: WU, Yue 144128
Date:11th December 2017
- Background
Good Life Diary Company Limited (GLDC) is a company that produces and sells a range of dairy products. This company was established about twenty years ago. The operations of the company are mainly in the PRC and its head office is in Hong Kong. Also, it obtained a listing for its shares on the Hong Kong Stock Exchange (HKEX) about four years ago.
- The American Accounting Association Model (AAA)
- Determine the facts
In this case, there is an investigation on the ethical implications of actions performed by David Chan who is serving as the CFO of Good Life Dairy Company Limited. David Chan is an influential and respected accountant and business leader in Hong Kong. He has been in business for 30 years. Also, he has been a CPA for many years and previously been on the management committee.
David received the confidential information about low levels of melamine in milk from one of GLDC’s collection centers in the PRC. He did not attempt to disclose this issue to any third party because he concerned about the damage of his employment security and GLDC’s reputation and profitability. It shows that the cover-up of problem is his intention to conceal the problem from the public and the officials.
Moreover, David hints that if Lucy, the business analyst, can sweep the matter under the rug, he will recommend her to the management for the CFO post when he retires next year. He was showing traits of corruption.
- Define the facts
There are some stakeholders related to the facts: Lucy Lee, Patrick, David Chan, Tammy Lui, Gary Wang, consumers, shareholders of GLDC, potential investors, HKICPA and the employees of GLDC, especially the middle-level and top-level managers.
David was not honest in his business relations by being biased to override business judgments and violating relevant laws and regulations as well as discrediting the profession. David’s integrity, objectivity and professional behavior should be the fundamental principles of his professional actions but were not.
- Identify the major principles, rules and values (COE)
Firstly, the principle of integrity imposes an obligation on all professional accountants to be straightforward and honest in all professional and business relationships. Also, it implies fair dealing and truthfulness. Nevertheless, David has the responsibilities to shareholders, employees and potential investors to provide them with honest information concerning the performance of GLDC.
Secondly, objectivity means an obligation on all professional accountants not to compromise their professional or business judgement because of bias, conflict of interest or the undue influence of others. But David must not allow the judgement of his own performance to impact the reputation of GLDC which could lead to criminal prosecution.
Lastly, the principle of professional behavior refers to an obligation on all professional accountants to comply with relevant laws and regulations and avoid any action that the professional accountant knows or should know may discredit the profession. However, David knows the contaminated milk but not tell the CEO. He did not avoid any action that may discredit the profession. Unfortunately, he violates the relevant laws and regulations.
- Specify the alternatives
In this case, as a CPA, David can maintain test results and back-up file notes so that he can comply with the rule of COE “represent the facts accurately and completely in all materials respects”. He can consult relevant third parties such as HKICPA, audit committee, legal counsellors or another professional accountant scrutiny on the fundamental principle of confidentiality for more objective advice.
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