ounts. You have recently been advised by the warehouse manager of a significant level of slow moving stock. The stock in question is now more than nine months old and would normally have been written down some months previously. The shareholders are trying to sell the company, and the managing director (the majority shareholder) has told you that it is not necessary to write down the stock in the year end accounts. You are sure that the managing director wants the financial statements to carry an inflated stock valuation because he has found a prospective buyer. The managing director has indicated to you that, if the proposed deal is successfu
You have been the finance director of a clothing retailer for ten years. The company’s year end is 31 March, and you are finalising the year end accounts. You have recently been advised by the warehouse manager of a significant level of slow moving stock. The stock in question is now more than nine months old and would normally have been written down some months previously. The shareholders are trying to sell the company, and the managing director (the majority shareholder) has told you that it is not necessary to write down the stock in the year end accounts. You are sure that the managing director wants the financial statements to carry an inflated stock valuation because he has found a prospective buyer. The managing director has indicated to you that, if the proposed deal is successful, all employees will keep their jobs and you will receive a pay increase. Key fundamental principles Integrity: In the light of the information you have, you must ensure that you act honestly, and that you are open and straightforward towards those with whom you come into contact. Objectivity: Can you act without bias, despite the significant threats in the form of self-interest and intimidation? Professional competence and due care: You must act diligently. Do you have sufficient information to be able to determine the appropriate value of the stock to be included in the accounts? Professional behaviour: You are required to account for the stock in accordance with relevant accounting standards. Would any of the actions you are considering discredit the profession in the opinion of an informed third party. Identify relevant facts, relevant parties, who should be involved in resolution and the possible course of action.
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