You are a recently qualified accountant and have accepted a job as financial controller for a well-established family business which supplies equipment to photographers, both by mail order and from itswarehouse outlet. Its customers range from enthusiastic amateurs through to part-time professionalsand owners of busy studios. The customers' payment methods reflect their diversity. There are creditcard transactions and customers with 30-day credit business accounts. There is also a surprisingly largenumber of customers who collect their goods from the warehouse and pay in cash. You are told thatcash payment probably reflects the nature of the customers' own receipts, as some photographers willoften be paid in cash for weekend wedding assignments. In your first week at the company, the salesdirector (the principal shareholder's son) brings to you a cheque in settlement of the account of a majorcustomer. He explains that the cheque (which appears to clear the amount due) is in fact anoverpayment, as the balance showing on the sales ledger is before allowing bulk discount (which iscalculated retrospectively). The sales director shows you his calculations and the agreement asauthorised by the board. The sales director states that the customer's managing director has come tocollect the discount in cash. He says that this is not an unusual occurrence for some of the company'sbetter customers. It helps to maintain a good relationship with those customers, which leads topurchasing loyalty. Another benefit of this arrangement is that it gives the sales director regular face-to-face meetings with the senior staff of those customers. It also reduces the high charges that the bankmakes for handling cash. You ask the sales director why the customers prefer to receive a refund incash, rather than simply pay the net amount needed to settle the account. He replies, with a smile, thatit is not for him to question their motives. Key fundamental principles Integrity: You and the salesdirector have suspicions about the motives of some customers who regularly overpay the company andreceive refunds in cash. Are you acting with integrity if you do not question those motives? Objectivity:Being new to the company, you are likely to feel intimidated by the directors, who are all members ofthe same family. Can you ensure that the intimidation threat does not adversely affect your ability tomake ethical decisions? Confidentiality: You should consider whether you have a responsibility todiscuss the practices of the company and its major customers with third parties, once all otherreasonable steps have been taken. Professional behaviour: You must comply with relevant laws andregulations and not assist others to act illegally or unethically. You must not do anything that maydiscredit you or the accountancy profession.Required:Identify the relevant facts.Identify the affected parties.Possible course of action

A whistleblower seems to be an individual who, while working for a firm or a government agency,…

You are a recently qualified accountant and have accepted a job as financial controller for a well- established family business which supplies equipment to photographers, both by mail order and from its warehouse outlet. Its customers range from enthusiastic amateurs through to part-time professionals and owners of busy studios. The customers' payment methods reflect their diversity. There are credit card transactions and customers with 30-day credit business accounts. There is also a surprisingly large number of customers who collect their goods from the warehouse and pay in cash. You are told that

You are a recently qualified accountant and have accepted a job as financial controller for a well- established family business which supplies equipment to photographers, both by mail order and from its warehouse outlet. Its customers range from enthusiastic amateurs through to part-time professionals and owners of busy studios. The customers' payment methods reflect their diversity. There are credit card transactions and customers with 30-day credit business accounts. There is also a surprisingly large number of customers who collect their goods from the warehouse and pay in cash. You are told that

Contemporary Auditing

11th Edition

ISBN:9781337650380

Author:KNAPP

Publisher:KNAPP

Chapter3: Internal Control Issues

Section3.2: Howard Street Jewelers, Inc.

Problem 3Q

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