i) Implication on the ethical principles

Integrity
In order not to breach the fundamental principle of integrity, the Finance Manager (FM) must be open and honest about the situation with the Finance Director (FD). The FM needs to be straightforward with the FD since it will not be right to ignore the issue, without proper investigation.
The possibility exists that the FD has made the adjustments to include some stocks located at another company’s premises or some errors identified with the stock count. However, if this is the case then why is the FD not providing evidence to justify his stock adjustments?
The FM should still try and resolve the issue with the FD. If the FM thinks he/she has already done enough by raising the issue with the FD, what will happen if the external auditors start to ask questions about the stock adjustments?

Objectivity
This is the ability to be able to question senior personnel when there is something that does not appear right, and not allowing self-interest or the undue influence of others override professional judgement. The FM should be objective and not allow the intimidation from the FD to override his professional judgement or his quest to seek clarification on the stock adjustment.

Professional Competence and Due Care
It is required of the FM to ensure that the quarterly management accounts are a fair representation of the company’s financial performance and position. It is therefore necessary that he takes the required steps to know if the company has some stocks elsewhere or probably if there were errors in the stock count.

Confidentiality
It is expected of the FM to respect the confidentiality of information he is privy to, without disclosing such to any third party (such as the bank) unless the necessary permission has been sought from the company. He can only do so if he has the legal or professional right or duty to do so.

Professional Behaviour
There is the need on the part of the FM to display professional courage by getting to the bottom of the matter. He should make the necessary effort to satisfy himself of the reason for the stock adjustment.

(Marks are evenly spread using ticks = 5 marks)

ii) The Finance Manager could consider taking the following possible actions to help remedy the situation.

• If there is another director that the Finance Manager can speak to, then he should approach and raise the issue with that director. If the FD is falsifying the quarterly management accounts, then he is bowing to the commercial pressure to ensure that OJ Ltd is satisfying the funding conditions placed on it by the bank, and all the directors might have agreed to this.

ager could consult ICAG for assistance.

• It would be unprofessional to attempt to ignore the issue. However, simply resigning from your employment, may cause significant problems for you and the practice. The Finance Man
• The Finance Manager should seek legal advice. However, if the Finance Manager plans to seek advice from outside the practice, he should be mindful of the need for confidentiality as appropriate.
• The Finance Manager could consider resigning if all other options prove futile. Since it is necessary for the Finance Manager to disassociate himself from all dishonest information/act, it may become necessary to resign if he thinks there may be some dishonesty in connection with the stock adjustment.
• The Finance Manager should try to collect as much evidence as possible, documenting all discussions and decisions made in relation to the stock adjustments to protect himself legally and professionally

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(Marks are evenly spread using ticks = 5 marks)