Ethical And Quality Control Requirements System

Ethical Issues Faced by Ethical Hemp Ltd

Discuss about the Ethical and Quality Control Requirements System.

Ethical issues refer to a problem that requires the organization to identify the alternatives by evaluating the right situation or wrong situation. Organizational sustainability and growth also depends on the ethical behavior within the organization, which is considered as an integral component of the business activity. In general, the business organizations incorporates ethical issues with respect to integrity issues, trust issues, issues on diversification for product manufacturing or business unit, issues on making business decisions as well as organizational governance issues (Weiss 2014).

In the present case, Ethical Hemp Ltd that was incorporated in the year 2005 and founded by Saffron Banksia and Esme Acacia found to have faced certain ethical issues that affected the analysis of true financial position of the business during the year 2016. One of the basic ethical issues identified in the present case is fundamental issues with respect to the integrity and trust within the business organization. As per the regulatory framework for business ethics, it is essential for the organizations to maintain honesty and fair means to operate the business activities (Apesb.org.au 2017). In the given case, the directors of the company Saffron and Esme appointed a part- time employee Tasma as a community engagement officer who was given the authority to spend the money on community projects as per she deems fit. Considering the regulatory framework of business organizations, it is against the business ethical regulations to provide the authority to a part time employee for spending the organization funds.

Second ethical issue that has been identified in the present case is issues on making business decisions for the consent given to Andy for employing junior accountants within the organizations (Shafer 2015). It has been noted that Andy was unable to monitor each aspects of the company’s business hence he appointed two junior accountants in accordance with the board’s consent given to Andy on employing subordinates. However, Andy appointed two employees for the profile of accounting while one of the employees had no experience on accounting while the other employee was a law professional but handled the work of preparing financial statements. Accordingly, it can be said that the company involved in the ethical issues for making business decisions since the employment of a person with no experience in accounting.

Third ethical issue involves in the present case is compliance and governance issue with respect to the monetary reporting and other fiscal laws. It has been observed that the accountants of the company did not prepare appropriate notes on accounts for preparing draft financial statements. In addition, bank statements and other statutory documents also not presented during the board meeting which is considered as significant document for making business decisions. Further, it was found that the company had spent excess amount of fund for expansion of proposed project in European region which was not authorized by the members of the board (Dellaportas et al. 2014). Accordingly, in the present case ethical Hemp Ltd found to be associated with the ethical issues governance and regulatory compliance for not preparing and reporting the financial statements as per the regulations of accounting framework. In the present situation, Andy as well as the directors of the company Saffron Banksia and Esme Acacia can be said to have ethical issues for not being responsible to consider the compliance of relevant principles.

Fundamental Principles of Professional Conduct Contained in APESB 110 Breached by the Concerned Party

As identified in the above requirement, ethical issues on business decisions can be said to be more significant which involves Andy’s decision on employing junior accountants as well as providing them with the major responsibilities. According to the regulations of “APESB 110 on Code of ethics for Professional Accountants” a member is required to follow the fundamental principles while conducting professional activities. APESB 110 states that each professional is required to follow the principles of integrity, objectivity, professional competence and due care, confidentiality as well as professional behavior (Apesb.org.au 2017). Considering the ethical issue in the present situation, two essential fundamental principles that have been breached are professional behavior and due care as well as professional behavior (Craft 2013).

Professional Competence and due care as per section 130 APESB 110 refers to the fundamental principle by which professional members are obligated to maintain the knowledge as well as skills of their profession. According to section 130 under APESB code 110, members are required to possess adequate knowledge of the profession to ensure the clients receive the professional service at competent level (Apesb.org.au 2017). It is essential for the members to act persistently as per the professional standards as well as technical standards while providing services to the organizations and clients (Thibodeau and Freier 2014). Accordingly, in the present situation, Andy violated the fundamental principle of professional competence by appointing inexperienced accountants and provided them the authority for making critical decisions.

According to the principles of APESB 110, professional member is required to oblige professional behavior while performing the services which relates to compliance of relevant legislations and regulations (Apesb.org.au 2017). It is essential that a member should not omit to follow the professional standards together with providing the relevant and specific facts to protect the adverse effect on the business organization (Sanusi and Izedonmi 2014). In the given situation, Andy breached the fundamental principle of professional behavior under section 150 since he appointed inexperienced employees for the role of accountant and imposed the critical work part on them (Spence and Carter 2014). It has been noted that the junior accountants presented incomplete financial drafts in the board meeting while Andy remained absent during the meeting. Accordingly, it can be said that Andy did not perform his services by maintaining professional behavior as he himself was responsible to check the correctness of financial statement notes and other statutory documents.

In the course of business and profession, it is essential to maintain the professional ethics and due diligence while performing desired services to the clients or organization. The member under the profession as professional accountant is required to follow code of conduct as a responsibility to perform activities for public interest. It is to be noted that the responsibility of professional member is not limited to comply the needs of respective clients or organization but extended to the benefits of public. Accordingly, member as a professional accountant is required to possess the fundamental principles of professional ethics while evaluating the significance and level of acceptance (Ge, Simnett and Zhou 2016). As per the regulations of section 320 under APESB 110, a member responsible to prepare the financial statements of the organization is required to ensure that the relevant accounting standards and principles has been complied with. It is essential for the member to ensure that the financial statements clearly describe the correct nature of transactions including assets and liabilities (Apesb.org.au 2017). Classification and presentation together with the accurate facts and notes to support the valuation should be presented in all material aspects should be done to ensure the transparency of the financial statements of the company (Han Fan, Woodbine and Cheng 2013).

Ethical Course of Action

Accordingly, in the present case, Andy should have maintained the ethical issues and code of conduct as a professional accountant while performing services within Ethical Hemp Ltd. Considering the first action of Andy for appointing junior accountants, the significant ethical course of action would be examine the accounting experience of the Helen whereas appointment of Conrad should not have been accepted. Secondly, after the appointment, Andy should have guided and trained Conrad and Helen, since both of the junior accountants were inexperienced. Andy himself should have reviewed the work of both the accountants ensuring the principles of professional competence and due care has been complied with. It was Andy’s responsibility to examine the performance of junior accountants instead of letting them take critical decisions with respect to business operations. In addition, while preparing the draft financial statements for the board meeting during the period January 2017, Andy should have examined the draft financial statements ensuring the inclusion of appropriate notes. Andy should have checked the compliance of accounting framework with respect to the proper presentation of transaction details, classification and support evidence that is bank statements and other statutory documents. Further, statement showing changes in equity is considered to be an integral part of financial statements as per accounting standards, which was not presented by the junior accountants. Hence, Andy should have examined the draft financial statements before presenting it before the board to ensure the inclusion of all relevant information.

Regulations of APESB 110 “code of ethics for professional accountants” states the fundamental principles every professional member is required to follow while providing professional services (Apesb.org.au 2017). The foremost principles of professionalism include integrity which refers to the honesty and fairness while conducting business or professional relationships. In the above case, if Andy would examine the professional competence and experience of junior accountants, principle of integrity have been met. The principle of professionalism incorporates objectivity which is considered to avid interest conflicts, biasness as well as undue influence for making professional judgments (Kipping and Kirkpatrick 2013). Therefore, examining the professional competence, knowledge and skills of Helen and Conrad would have covered the principles of objectivity while preparing the financial statements and considering other critical business decisions. It has been observed that both the junior accountants were inexperienced and were given the authority for taking critical and significant business decision. Accordingly, Andy failed to comply the principle with respect to the professional competence and due diligence since he did not analyze the expertise of the accountants and imposed the critical business activities on them (Henderson et al. 2015). Professionalism principle in terms of professional competence is required to follow by the members for conducting services in accordance to the relevant legislations and accounting standards (Hurtt et al. 2013). Hence, for appointment of junior accountants if Andy examined the experience of Helen and Conrad then, the principle of due diligence and professional competence would have been met.

In order to prepare financial statements and other business services, it is essential to avoid potential conflicts that affect the growth of organization as well as transparency in reporting the financial results. Inexperienced employees as accountants cannot be regarded as professionally competent for considering the significant business decisions, preparation of financial statements and presentation of the reports before the board meeting (Barkemeyer et al. 2014). Accordingly, Andy has been recommended to examine and review the accounting reports prepared by the accountants as an ethical course of action which is considered to have met the principle of professionalism as per APESB 110.

According to section 320, professional member is required follow several requirements for preparing and reporting financial information to evaluate the business performance, financial position and necessary business decisions. Therefore, the accounting framework and APESB 110 regulations states that the professional member must ensure the presentation of transaction details, valuation details of assets and liabilities is present in the financial reporting (Apesb.org.au 2017). In addition, the member must ensure that the financial information has been appropriately classified in accordance with the time and nature of the business (Fatemi, Hasseldine and Hite 2014). Therefore, as an experienced professional accountant, Andy should have assessed the draft financial reports presented by the junior accountants to comply with the regulations of section 320 under APESB 110.  It is essential to meet the standards of ethics while providing professional services to maintain the social and public interest together with the benefits to the business entity (Soltani and Maupetit 2015). Hence, Andy has been responsible to measure the compliance of relevant legislations and standards while reporting financial information in the board meeting which would affect the decision making process of the business. Therefore the ethical course of action for analyzing the work of junior accountants, analysis of relevant notes and bank invoices would serve the purpose of meeting professionalism principles.

Reference List

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