Reference no: EM132913051

Case Study

• As a result of the modernisation efforts of Azman Wong Bhd a company in the manufacturing sector (henceforth referred to as "the Company"), the directors are of the view that the Company requires a further significant injection of working capital since the Company has committed itself to producing and supplying future orders of goods of an international quality.
• The current lending policies of the Company's banker requires borrowers to demonstrate a good stream of projected future cash flows, as well as a level of profitability which would indicate that repayments would be made in a timely manner. However, the current projected future cash flows of the Company would not satisfy the bank's criteria for lending.

Meanwhile, the Directors of the Company informed the bank:

• "Our company is in an excellent financial position. Our latest cash flow projections and financial results will meet your criteria for lending. Our Chief Accountant, Mr. Ariff will forward the necessary supporting documents to show you our current financial position."
• Mr. Ariff, the Chief Accountant joined the Company recently and has openly stated that he cannot afford to lose this job due to his current high level of personal commitments. Meanwhile, the directors are actively involved in managing the level of profits of the Company as they have vested interests to do so. Furthermore, they feel strongly that such efforts on their part would not pose any conflict of interest with the public interest and accounting ethics. They are of the view that ethical behaviour and codes of ethics are irrelevant and are not important in managing the Company as compared to managing their profits.

Problem 1: Identify and evaluate the ethical principles which would guide how a professional accountant should act in this type of situation.