Cases for Discussion

Case 1:

You work as an accountant for a company that exports electronic equipment. You have been asked to
prepare the export documents and invoice for an export order to a customer in Country Z. You are
aware that the customer in the Country Z is an agent for an organization in Country H. Because of your
country has a civil war in Country H, your government has placed a complete ban on export of goods to
Country H. What should you do?

Case 2:

Suppose that a manager is given confidential information by an employee which he promise to keep
confidential information and not to disclose to anyone else.

Case 3:

Case 4 :

As financial controller at a manufacturing company you have been advised by a colleague that
the sales director is unlawfully declaring fuel benefits as the tax value is high. This has been
creating higher profit margins and if declared those margins will go down. There is potential that
this could push the company into insolvency, which would result in job losses for 300
employees.

You have made the other directors aware of the situation but they have expressed a wish not to
disclose the misleading tax bill. You are aware that by declaring this information to the tax
authorities, as required by law, that the organisation may have to declare insolvency and the
300 employees could lose their jobs.

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Case 5:

You are a MIA member employed as a company secretary for a small family owned limited
company. The board is made up of family members, with only one family member holding an
executive position as managing director.

There are some disagreements within the family regarding the will of the recently deceased
chair of the board, the mother of the family. The board have twice voted to pay pension
contributions to one of the members of the family on the board as non-executive director, a
brother of the managing director, and this has been approved by majority in meeting. However,
you have since been advised by the managing director not to make the payment.

Case 6:

You are a MIA member who has recently joined a limited company that processes food. The
company is effectively run by one director. The other directors are non-executive and all have
close personal relationships.

As a key member of the finance team you have discovered that some employees are being paid
cash in hand and not via the formal payroll. You also have suspicions that some of these people
are being employed illegally and you have no records of their formal employment documents or
contracts.

Question Ethical issues

Briefly explain the main ethical issues that are involved in the following situations.

(a) Dealing with a repressive authoritarian government abroad

(b) An aggressive advertising campaign

(c) Employee redundancies

(d) Payments or gifts to officials who have the power to help or hinder the payees' operations

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Case for Discussion

Beautiful Textiles Sdn Bhd., is a clothing manufacturer, based in an Asian member state, with an international
market for its designs. The company's regular monthly board meeting will take place in a couple of days' time. It
seems likely that most of the meeting will be taken up with discussing two issues.

Factory closure
The chief executive of the company has received an offer from a property developer for one of its factories in its
home country. The proposal is to buy the freehold and to demolish the factory to build office units. The developer is
offering RM3 million for the site which presently employs 150 staff. The developer wishes to exchange contracts as
soon as possible, but would not take possession of the site for another year. The chief executive believes that
accepting the offer makes strategic and financial sense for the company. The developer is quite happy for the offer
to be made public once contracts have been exchanged.

It will be possible to relocate all but one of the current manufacturing contracts currently being undertaken by this
factory to the company's remaining factories in other Asian countries over time, without undue delay. However, the
one exception is by far the largest contract the company currently has. The customer has imposed tight time limits
on this contract and will terminate it if its requirements are not met. Production on this contract must continue
uninterrupted for the next six months at this factory if the customer's requirements are to be met. The policy of the
company is to offer either jobs elsewhere in the group or redundancy packages of 30% of current salary to staff who
are affected by a factory closure. The redundancy packages are rather more generous than the statutory minimum in
the company's home country. However, only 20% of staff, mostly at managerial level, are likely to receive offers to
transfer to other parts of the group. There are no similar jobs available locally.
The chief executive is concerned that rumours may possibly soon start circulating about the offer and staff may start
demanding assurances from management that their jobs are safe. The chief executive fears that if staff knew or
feared that the factory will close, there would be a fall-off in output and quality, and possibly industrial action.
These would seriously jeopardise the company's ability to fulfil the large contract.

Treatment of staff
One of the company's directors has recently returned from visiting a factory located in another European Union
member state. Over the last few years this factory has performed better than any other in comparison with cost
budgets, and has been particularly good at keeping its labour costs under control. However, on his return from his
visit, the director reported some worrying facts to the chief executive. The factory had suffered a significant number
of losses of experienced part-time female staff. Although none had been dismissed, other employees still working at
the factory made serious accusations that some had been 'forced' to resign by the actions of the factory manager.
Among other accusations, it was suggested that they had been pressurised to take on work outside their contractual
hours, or at times when they had never in the past had to work, such as during school holidays, weekends or on late
shifts. Some had taken on the extra work in fear of losing their jobs and in the knowledge that other clothing
factories locally had closed down in recent months. However, many of the other staff had found the new working
arrangements impossible to fit in with their domestic situations and had reluctantly handed in their notice. To
replace the staff who had left, the factory manager recruited full-time staff on flexible contracts, which required
them to accept shift changes provided two weeks' notice was given to them.

Required

a. Analyse whether to disclose the decision to close the factory to the staff working in the factory, using the
American Accounting Association ethics model.
b. Analyse whether the factory manager's treatment of his staff is ethical using Tucker's 5 question criteria.