Reference no: EM132974088

Based on a case study by the Institute of Chartered Accountants in Scotland You are the finance director of Fortunesareus Ltd, a large Australian subsidiary of an internationally based financial services organisation, which has grown substantially in recent years. You have been in the role for 4 years and believe that there is a very real chance that you might be promoted to the group finance director position within the next couple of years, as long as you do not rock the boat. You believe that such a promotion is merited. You have committed yourself to the organisation and your work is your life, at least at the moment. The Fortunesareus group, has had a bad couple of years worldwide, partly to do with the economic downturn in most areas, but also to do with poor management in some key areas of operations (but not in Australia). In response to these poor results, the US parent had insisted on 5% cost cutting efficiencies in the current year in all subsidiaries: for you in the Australian subsidiary, this was a very tough target and you have just about achieved it, but at the cost of a dispirited workforce and a range of economies which could not be sustained in the long term. The need to ensure that the company satisfies all of its regulatory requirements is a major issue and these cuts have left your organisation vulnerable. At a recent video conference, Dan, the American Group FD, informed you that all subsidiaries must achieve a further 10% efficiency saving in the subsequent year (for which you are currently preparing the budgets), but that all operational and sales targets must still be met. You and your colleagues greet this news with a degree of incredulity but it is made very clear that this is not negotiable. You know that this is going to be almost impossible to achieve in practice and so, the next day, you call Dan and share these views with him. He tells you in no uncertain terms that your views are unhelpful and that if you are not prepared to implement these cuts then someone else will be found who can. You point out that the cuts will severely impact on the business's ability to satisfy its legal and regulatory responsibilities: "We are struggling as it is to satisfy our compliance requirements." Dan replies ominously: "That is your responsibility, not mine." By the end of the call it is clear: either cuts will be made or you will be fired. Once again you think to yourself, can further costs be trimmed without impacting on the company's compliance needs? You come to the same conclusion that this does not appear possible unless the company is willing to live with the significant risk that it will not comply with the regulatory requirements. What do you do now?

Refer to case study 2 in the Ethical Case Studies: Fortunesareus Ethical Scenario and address the questions at the end of the case study:

Problem 1. What are the readily identifiable ethical issues for your decision?

Problem 2. Who are the key parties who can influence, or will be affected by, your decision?

Problem 3. What fundamental ethical principles for accountants are most applicable and is there an apparent conflict between them?