Professional Accounting Case Study

1. APES codes of Ethics for Professional Accounting states that all the members of accountancy profession should act in the interest of their clients, employers, investors, government, employees and all others who rely on the report or work done by them. (Moroney R, 2011). It gives the reason why these bodies produce ethical guidance: the public interest.

Professional accountants require an ethical code as they hold positions of trust because of which people put their faith on them. The accountability to act in the public interest is the distinguished mark of this profession.

The fundamental ethical principles are to act with integrity, objectivity, professional competence and due care, confidentiality and professional behaviour; which govern

GBB, when auditing inventory costs of LPL, reviewed that the cost accounting system and discovered that a large unfavourable labour variance is recorded as asset in 2014. The variance led to the material misrepresentation in the financial reports. This bug in the new accounting system is directly responsible for the calculation of the unfavourable variance. The fundamental principles of Integrity (Sec 110) refers being honest and straight forward in professional and business relationships (BPP Learning Media, 2012) but Gordon’s act is a breach of this principle.

Gordon knew the fact but without informing discussing it with LPL’s management he decides to inform Jane about the overall situation.

b. Jane advises Gordon that GBB cannot afford to lose a client (Auditing since 2012) which will also impact Gordon’s profit share too. The fundamental principles of objectivity (Sec 120) refer an obligation of all professionals not to allow bias, conflict of interest or undue influence of others as well as not to compromise professional or business judgement. (BPP Learning Media, 2012) This implies the breach of ethical principal of objectivity.

Jane is also a university mate of LPL’s Chief Executive and a good friend since