Question Tag: Ethical Breaches

i) Ethical Breaches

The possible ethical breaches committed by Hannah, Mr. Terkper, and Mr. Okantey are as follows:

1. Integrity (Hannah and Mr. Terkper):
   • The principle of integrity requires accountants to be straightforward and honest in all professional and business relationships. By overlooking Hannah’s repeated cash shortages and not requiring her to refund the amounts, both Hannah and Mr. Terkper have breached this principle.
   • Hannah has failed to fulfill her responsibility as a cashier by not accounting for the shortages, while Mr. Terkper has not upheld his duty to enforce company policy consistently.
2. Objectivity (Mr. Terkper and Mr. Okantey):
   • The principle of objectivity requires accountants to avoid bias, conflict of interest, or undue influence. By not holding Hannah accountable for her cash shortages due to her relationship with the Managing Director, both Mr. Terkper and Mr. Okantey have compromised their objectivity.
   • Mr. Okantey’s instruction to write off Hannah’s cash shortages shows undue influence and favoritism.
3. Professional Competence and Due Care (Mr. Terkper):
   • As the Finance Director, Mr. Terkper is responsible for applying the company’s policies consistently. His failure to demand accountability from Hannah undermines his professional competence. Additionally, agreeing to write off the cash shortages is a sign of negligence in fulfilling his role.
4. Professional Behavior (Hannah, Mr. Terkper, and Mr. Okantey):
   • By allowing Hannah’s cash shortages to go unchecked, the actions of all parties bring disrepute to the company. Writing off the cash shortages sets a bad precedent for other employees and tarnishes the reputation of the company.

(4 marks)

ii) Recommended Actions

To address the ethical breaches, the following actions should be taken:

1. Strict Enforcement of Cash Management Policies:
   • The company’s policy on cash shortages should be strictly enforced for all employees, including Hannah. Any future shortages must be recovered promptly, in accordance with the established policy.
2. Engage the Managing Director:
   • Mr. Terkper should engage Mr. Okantey to explain the consequences of favoritism and the ethical implications of allowing cash shortages to go unaddressed. He should advocate for a fair and consistent application of company policies.
3. Disciplinary Measures for Hannah:
   • Hannah should be required to refund the total amount of cash shortages she has incurred. Disciplinary action may also be necessary to ensure that she understands the seriousness of her role as a cashier.
4. Reinforce Ethical Standards and Training:
   • The company should reinforce its ethical standards by organizing training sessions on ethical behavior and accountability for all employees, including management. This will help promote a culture of integrity and fairness within the organization.
5. Implement Strong Internal Controls:
   • Stronger internal controls should be put in place to prevent future cash shortages. The company could introduce measures such as cash handling training, tighter cash reconciliations, or an independent review of cashier activities.
6. Seek Guidance from Professional Bodies:
   • If the Managing Director continues to insist on writing off the shortages, Mr. Terkper should seek guidance from a professional body, such as the ICAG, to resolve the ethical dilemma and ensure that his professional responsibilities are not compromised.

(6 marks)