What are the ethical issues here?
The ethical issue in the case is junior colleague do not seen the sales invoice and the stock was
being written off without proper accounted. This reflects the weak internal control of the
company. If the invoice is not issue, this may understated the revenue and thus understate profit.
In our opinion, the company is possibly with intension to understate the revenue and avoid the
The second issue is regarding the machinery that being sold by the company but the transactions
did not record. In our opinion, the company is trying to conceal the sale proceed of fixed assets
and thus it will overstate the assets of the company in financial statements. Supplier can creditor
of the company may mislead by the financial statements and do not make a wise decision.
Furthermore, in tax perspective, the company can continue to claim capital allowance as the
company still possessed the ownership of the assets. This will understate the tax liability of the
company. Besides, the money received from sale proceed of machinery not recorded in the book
and may be misappropriate by someone.
Which principles of the code of ethics are relevant?
The principles of the code of ethics are relevant to this case are integrity, objectivity, and
professional competence and due care. A professional accountant is required to comply with the
above stated fundamental principles to act as professionalism. Moreover, MIA By-Laws also
indoctrinate the professional practice and the prevention of illegal and dishonourable practices.
In accepting professional assignment, a professional accountant should be integrity that is
straightforward and honest in all professional and business relationships. The accountant known
the fact that the company recently sold a large piece of machinery for cash, and that these
transactions did not go through the books. However, if the accountant ignores the fact, he is