National Culture and Ethical Judgment - Free Samples to Students

Question: Discuss about the National Culture and Ethical Judgment. Answer: Introduction: From analysis of Preston Company it was observed that it is a manufacturing firm that wishes to expand its product line in domestic equipment. For such reasons, list of fixed assets was provided along with its acquisition date, original cost and accumulated depreciation on single asset basis. Fixed assets were old and so their book values were less than actual costs. Fair market values for fixed assets were deemed to be used in determining purchase price portion that must be allocated to goodwill. [1] Moreover, auditors of the parent companys purpose were to become familiar with company operations and conduct an audit. They offered opinion on the consolidated financial statement for the year. From such opinion, the owner realised that the parent company might sell few assets of the subsidiary company for expansion of its product lines. Moreover, an increased book value can also result in drastic loss as goodwill was used to increase asset value and was not stated in financial stateme nt. The ethical issue that took place in the company was regarding misrepresentation of accounts. Fixed assets of Preston Company were deemed to be old and for this reason, their book values were drastically lesser than the actual costs. Conversely, after completion of the companys financial statements audit Wilson was surprised to observe misstatement of financial statements. This is for the reason that goodwill amount of $450,000 was not indicated but has been employed for increasing the asset value. [2] With their asset values faster write-off of the same might occur in comparison to the goodwill within 20 years. Considering this, it can be said that as per American Accounting Association (AAA) ethical decision-making model to this asset valuation/goodwill problem misrepresentation of accounts was done by auditors. The auditors either involve in such conduct or failed to carefully audit assets of Preston Manufacturing Company. Six major principles, rules and values that are important to the evaluation of the case with specific reference to Stephanie Wilsons ethical dilemma are explained below: Establishing facts regarding the case to make sure that there is no ambiguity regarding the things taken under consideration. [3] Identifying ethical issues within the case through asking the ethical issues those are at stake. Identifying certain norms that place the decision within its ethical, social and professional behavior aspect. Recognizing alterative courses of action in accordance with the norms that can make it possible to see those options that are according to the norms and those are not. Selecting the best course of action and considering the consequences of results. Purpose of this rule is to make implications of the outcome unambiguous so that financial decision is made in all the decision options full knowledge and recognition. [4] Four options that are that can be considered by Wilson in resolving such ethical concern of misstatement of financial accounts are explained below: As per American Accounting Association (AAA) guidelines, before goodwill valuation capitalization of net profits must be ensured for obtaining the value of overall business along with subtracting net tangible assets value. Goodwill valuation approaches must also consider capitalizing surplus profits after interest. Statement of Standard Accounting Practice No. 22, SSAP 22, and Accounting for Goodwill must consider goodwill amortization over its useful economic life that recommends direct goodwill write-off in comparison to reserves. Cost of goodwill might be subtracted from shareholder equity as the goodwills nature is different from other assets of the company. This goodwill cannot be charged within the profit and loss account by annual amortization charges. However, a write-down might be required as the goodwill has experienced impairment in its value. As per Article 10 of Delegated Regulation (EU) 2015/35, asset valuation norms, principles and values with alternatives for Preston Company are explained under: Recent prices within an active market for the properties of distinct nature, location or condition or subject to distinct lease or certain contractual terms must be adjusted to signify asset valuation differences. Taking into consideration that the uncertainty degree associated with future taxable profits resulted from any new business increases for the projection tome becomes lengthier. This is specifically when such projected profits are anticipated to increase in time beyond the undertakings normal planning cycle. The company must consider using cost approach in valuing goodwill. Through employing this approach, the company can anticipate the amount of required current costs in order to recreate the elements of goodwill component. This approach will involve method of component restoration. Whistle blowing is a process in which a whistleblower is exposed to certain type of information or conduct which is considered being unethical, illegal or highly inappropriate in the company whether the company is public or a private company. Due to this reason, several laws are there to protect whistleblowers. Whistle blowing is deemed to serve as an indispensible tool that makes sure of effective corporate governance procedures in the company. Whistleblower protection is considered to be highly necessary in order to encourage reporting regarding misconduct, corruption and fraud. [5] Offering effective protection for the whistleblowers supports open company culture in which the employees can be aware of appropriate reporting techniques. It can also facilitate businesses to avoid and detect bribery within commercial transactions. Importance of whistleblower protection was confirmed at international level when OECD guidelines support Guiding Principles for Whistleblower Protection Legislation for dealing with corruption. For safeguarding integrity and accountability, whistleblower protection is recognized by every major global instruments surrounding corruption. Considering that Watkins was whistle-blowing today and in Australia, certain guidelines were provided to her concerning her legal protection in compliance to Part 9.4AAA of the Corporations Act. For legal protection of Whistleblowers, this corporation act makes sure that the whistleblowers attain: Protection of information provided by them- Information provided by whistleblowers must remain a protected disclosure and their identity must also not be disclosed unless that is authorized by law. Protection against litigation- The whistleblower must be provided with protection against criminal or civil litigation for protected disclosures. As per Corporations Act if a whistleblower is terminated for protected disclosure, he might ask the court to reinstate them in his real position or in other comparable position. Protection against the chances of victimization- As per Corporations Act it will be a criminal offence to victimize a whistleblower because of their protected disclosures. However, as per this act if a whistleblower is victimized he can charge for compensation considering damages created by the offender. As per Corporations Act, there is a high value of whistleblowers protection in any organization. This because of the reason and as per the act whistleblowers protection is vital in encouraging the reporting of fraud, misconduct and corruption. In such case, protecting private sector whistleblowers supports the reporting of certain bribery along with other corrupt activities conducted by companies. Protecting public sector whistleblowers supports reporting of passive bribery along with misuse of waste, fraud, public funds and other types of corruption. Supporting and encouraging whistle blowing through offering efficient legal protection along with clear guidance on reporting policies might also facilitate authorities to ensure compliance through detecting anti-corruption policies. Offering effective protection for them can support an open company culture in which employees will be aware of proper reporting with promoting public sector accountability and integrity. Considering the rel evance of maintaining while blowing protection laws, certain provisions have been developed that strengthened the global legal structure for nations to maintaining efficient laws regarding whistleblowers protection. Sleepy time Ltd is an herbal and vitamin remedy organization that manufactures organic and natural sleeping pills for people facing trouble in sleeping. From analyzing the case study of Sleepy time Ltd certain issues have been discovered in relation to OECD principles of corporate governance. There are three actions in the above case study that is deemed to generate concerns in adherence to OECD principles. Certain major principles have been disregarded by Sleepy time Ltd Company. From the case study it is gathered that the companys board of directors includes executive and non-executive directors. Two among them are potential consumers and another one is a major shareholder of the company. This is observed to create issue regarding conflict for interest. Moreover, the directors being consumers will not have accurate access to confidential information and there is a chance that they can misuse corporate assets and associated party transactions. [6] In compliance to OECD principles, the company must appoint adequate numbers of non-executive board members that will be able to exercise free judgment to tasks in which conflict of interest might arise. In order to maintain a stable position in the marketplace, the shareholders those purchased shares in initial public offering decided to purchase and hold shares for over two years. However, in adherence to OECD principles certain issues regarding material conflict of interests who can compromise with the integrity of decision making and advice. In adherence to OECD principles, the company should participate and be informed on decisions regarding major corporate changes such as authorization of additional shares. The company announced that for avoiding takeover from competitors it has generated contracts with senior management regarding receiving payments of $20 million each in case the takeover occurs. As per the OECD guidelines such decision of the company is against corporate governance ethics. The principles state that costs associate with effective ownership should and can be decreased. In such situation OECD corporate governance principles allow that authorities must permit or encourage companies to co-operate their actions. Such co-operation must not be focussed on manipulating the merger company or gaining control on the organization without considering suitable takeover procedures. References Bobek, Donna D., Amy M. Hageman, and Robin R. Radtke. "The effects of professional role, decision context management, and gender on the ethical decision making of public accounting professionals."Behavioral Research in Accounting27.1 (2015): 55-78. Cuomo, Francesca, Christine Mallin, and Alessandro Zattoni. "Corporate governance codes: A review and research agenda."Corporate governance: an international review24.3 (2016): 222-241. Curtis, Mary B., et al. 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