Accounting Business Reporting for Decision Making

CHAPTER 2 Accounting in society 79

Required

a. Outline the main issues of this case.

b. Now that you have read the outcome of the Westpoint Corporation case, and particularly that

investors lost millions of dollars, how do you feel about your recommendation in 2.1?

SOLUTION TO 2.2

The issues involved in the case include:

• financial planner independence and commission versus fee-based service


• code of ethics — honesty, integrity, trust and objectivity


• general philosophy viewpoint:
  
  
  • obligation and sense of respect and dignity for your client, versus
  
  
  • a strict self-interest principle where everyone is expected to look after themselves.
    The way you feel will depend on whether or not you recommended the investment in 2.1. Your
    sense of responsibility to your clients would also depend on whether you feel a sense of obli-
    gation towards your clients (under Kantianism) or whether you operate on a strict self-interest
    principle.
    Note that Westpoint Corporation was classed as a Ponzi scheme and action was taken against
    it by the Australian Securities and Investments Commission (ASIC). Claims of approximately
    $570 million were lodged to the court against the directors of the nine Westpoint mezzanine com-
    panies, KPMG (the auditors of the Westpoint Group), seven financial planners and a trust that held
    an unsecured mezzanine note. To read more about the Westpoint collapse and subsequent recovery
    of monies please go to https://westpoint.asic.gov.au.
  
  
  
  

Comprehension questions

2.3 Describe the structure of corporate governance as put forward by Farrar. LO3

2.4 Compare and contrast the views of Hobbes with those of Smith and Friedman. LO5

2.5 Outline the major maxims of Kantianism and describe what they mean. LO5

2.6 What is meant by business sustainability? LO1

2.7 Suggest ways in which suppliers and customers could work together to reduce their overall

impact on the environment. LO1

2.8 Outline the benefits for organisations in considering business sustainability. LO1

2.9 What are the three pillars of sustainability? LO2

2.10 Discuss whether an accountant should take on an appointment outside his or her area of

expertise. LO5

2.11 Outline the principles of business sustainability performance as put forward by Epstein

and Roy (2003) as cited in Epstein (2008). LO1

2.12 Imagine that you are a manager in a large entity and need to make a recommendation to

the CEO on which tender to accept. The job being put out to tender by the entity is worth

millions of dollars and you have a significant ownership share in one of the companies

tendering. Outline the ethical issues to be considered. LO6

2.13 Outline some ways that accountants could contribute to the sustainability efforts of

organisations. LO2

2.14 What are the four key responsibilities of business? Do you think an entity should consider

discretionary responsibilities? Why or why not? LO5

2.15 Suggest what the most important driver of sustainability would be and explain your

rationale for its selection. LO1

2.16 ‘Complying with the law will always mean that you are acting ethically.’ Discuss this

statement. LO3