The Accounting Case Study

The case study:


Y Pty Ltd (Y) is based in Sydney and employs twelve people. Y imports two products from the one Hong Kong manufacturer, and distributes them throughout, Australia. John is a qualified professional accountant with a bachelor’s degree from the University of Western Sydney (UWS), and the Financial Controller of Y.
Sam is the sole owner of Y and over the past four months he has been preoccupied with his interest in coaching a representative basketball team and thus shown a distinct lack of interest in the business of Y. As a result, service levels have declined which has led to an increase in customer complaints and sales have started to fall. This has frustrated John as Y has a history of profitability and stable growth.
Sam has relied on John for his ability to keep things on track whilst he has been preoccupied coaching and travelling with the representative basketball team, as well as, his financial expertise.
John’s friend Rachael, who owns Rachael Imports Pty Ltd (R), is also in the import and distribution business, although with completely different products. One day Rachael phones John.
The phone call goes as follows:
RACHAEL: Hello John, it is Rachael here. I trust you are well!
JOHN: Yes, I am Rachael. Thank you for enquiring. How are you and your family Rachael?
RACHAEL: We are all well. I just wanted to let you know that I have had several meetings with the Hong Kong manufacturers you get your two products from and they advise me they are not very happy with Y and are of the opinion you can no longer provide the required levels of service.
JOHN: This does not sound very good Rachael.
RACHAEL: No it isn’t John. In fact they have asked Rachael Imports Pty Ltd (R) to tender for the contract and distribution rights for the two products that Y Pty Ltd (Y) currently distribute.
JOHN: I see.
RACHAEL:John, we need a good team here at R if we are successful in our tender, and I am confident that we will be. I can offer you a very attractive salary package and would like you to bring Y’s best staff with you to R upon the collapse of Y.
JOHN: Thank you for your call.
RACHAEL: Take care John. Please consider my offer. Obviously this is confidential so don’t mention it to anyone just yet, especially Sam.

Required:

1. Answer the following questions, i.e. (a) to (d) inclusive, based on the Case Study presented above on page 2 and assume that you are John, the financial controller of Y Pty Ltd.
(a) Identify the relevant facts of the above case study to your role as
financial controller of Y Pty Ltd.
(b) List the four key stakeholders affected by the above case study.
(c) With reference to the relevant Code of Ethics for Professional Accountants (CPC), identify and discuss the relevant ethical principles John should consider in dealing with this situation.
Set your answer out to part (c) as follows:
Ethical principle Discussion (how the principle applies to the case)
(d) Explain the consequences of each of the following actions that John (i.e. you) could choose:
o say nothing; or
o tell Sam.

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