Accounting Case Study Business Goals

Business goals and ethical processes

Business goals include growth and profitability, so management ensures that they engage in ethical processes that help them achieve their goals. Case studies helped us understand the different impacts of decision making on organizational productivity and performance. Especially if the retailer deliberately chooses to delay payment for shipment. Another issue is the lack of ethical retail practices. In some cases, auditing and accounting also contribute to organizational performance through regulation of financial transactions and upholding ethics in their practice. Further, it is evident that the ethical conduct of an organization is applied to help promote the right processes and behaviour in business (Vranceanu, 2013).

Impacts of unethical practices

Due to the impacts of unethical practices such as employee’s underpayment, harassment, and inaccurate accounting procedures, the organization’s performance and reputation declines. The approach involves the study of a real business situation to help understand the decisions made and their impacts on the management and other stakeholders. The information captured in the case is analysed using the performance standards to obtain a better understanding. I have applied analytical skills such as comprehensive comparison and evaluation. Also, I have applied knowledge gathered from studies in other areas to understand the case concept. The information in the case has created the need to conduct further study to understand the correlation between ethics and performance.

Introduction

The case study reveals the situations experiences in an Australian retail industry, decisions made and the ethics in the organization. The retail industry is fast growing despite the high competitions. The management policies and decisions in the retail sector are targeting high profits. Due to the high competition in the sector, firms are engaging in unethical business practices to help make profits either in the short-term or long-term (Vranceanu, 2013). The case indicates the various business conditions and the decisions made by the management that resulted in changes in the outcomes. Further, the case illustrates the retail industry in Australia and the various forces that determine the business decisions made by the management. The retail industry is characterized by high competition thus the managers in different positions make diverse decisions aimed at maintaining profits in the organization and gaining competitive edge (Vranceanu, 2013). Notably, the case study captures the various decisions and practices that affect the profitability of the organization’s activities in the industry. Moreover, the case shows the role of competition, organizations management policies, human resources, and ethics in business processes. Further, the information reveals the various costs and application of power in business activities and their relations to the profits. Also, the paper covers the areas of supplier deals that include negotiations and accounting within an enterprise. The decision-making aspect in a firm in the areas of performance measurement, reporting and reward systems may comply with the ethics of business (ASX Corporate Governance Council, 2017). Finally, the case reveals the contribution of the accounting in the changes within an organization.

The highly competitive retail industry

The case reveals a highly competitive retail industry and the business environment is highly changing. The retailers are characterized by engaging in high price competition and decisions targeting making profits. The major players are the high profile big retailers such as Woolworths, Wesfarmers, and Tesco PLC that have dominance in the market. Some of the common characteristics of the players in the industry include the power to influence the market, the vast capital, and the decision/management structures. The accounting practices in the industry are organized according to the accounting act although the firms are liable for violating some clauses mainly in the reporting process. The audit processes are conducted by the auditors who report to the chief financial officer and the chief executive officers thus there may be challenges in getting accurate reports. The corporate governance structures give power to the senior managers to make decisions that affect the entire firm such as financial planning (ASX Corporate Governance Council, 2017). Some of the ethical foundations of the industry include appropriate pricing of commodities, accurate account reporting, transparency in deals, right business procedures and upholding business ethics. The issues that arose in the sector include the continuous price wars, workers and supplier exploitation, unethical business practices and excessive rebate purchase. The occurrence of these events caused changes in the retails activities mainly accounting and the supply chain.

Responses to the Case Questions

Q1. Good faith

The food and grocery code of conduct are helpful in creating a platform for conducting business in a regulated manner thereby prevent the exploitation of the suppliers. The creation of the code of conduct targets the establishment of a retailer and supplier relationship that upholds business standard to ensure there is a mutual benefit to both parties (Australian Competition and Consumer Commission, 2017). The good faith in business encompasses the formulation of business undertaking targeted at creating a platform where both parties benefit. Further, the good faith in business incorporated the conduct that prevents the exploitation of one party in business by the other. In the case study, the good faith is expressed where the retailers engage in business practices that benefit them and their suppliers. Further, it involves lawful business without exploiting their suppliers such as offering timely compensation and creating business practices that do not lead to wastage or loss to their suppliers. Further, the good faith is evident in negotiations and business agreement terms to prevent issues such as threats and intimidation of suppliers by the retailers if they fail to comply with the stated terms. Therefore, the good faith helps to prevent misconduct in business or the selfish acts during trade thereby ensuring that both parties achieve their goals without discrimination (p7 para1). Moreover, good faith emphasizes on the establishment of behaviours that leads to cost advantage to both parties without humiliation and mistreatment.

Q2. Voluntary Code

The food and grocery code of conduct is a voluntary code, and the ACCC hasn’t made it a law for various reasons including the terms of engagement and changes in the business environment. The code guides the operations between a supplier and retailer who sign the agreement to conduct business together. Therefore, the terms of engagement may change depending on the transactions (Australian Competition and Consumer Commission, 2017). Further the changes in business environment and levels of competition may lead to changes in business terms and dealings. Further, the code cannot be made into law due to the continuous changes in the supply chain. Moreover, suppliers have different bargaining power capabilities thus it would be difficult to enforce the code due to the influence of retailers in the market. The business competition strategies differ across firms in the industry thereby making it hard to implement the code of conduct because it would limit competitions in the sector leading to poor business performance. Also, enforcing the law would lead to a reduction of bargaining power and limit the business negotiations. I think the food and grocery code of conduct is voluntary and the ACCC has not enforced it into law because it would interfere with the freedom of doing business thereby interrupting business transactions.

Q3. When the use of power is appropriate and assessing when it is legitimate during decision making

The strategic decision making helps an enterprise gain advantage and creates solution during difficult situations. The creation of strategy is critical to the success of the business. Some of the strategic decisions involve areas such as pricing and gaining competitive advantage in the market. The strategic acquisition of power gives a business advantage thus gain the capability to negotiate trade terms and control the transactions. Further, having power enables the business to achieve their objectives and goals easily despite the competition in the industry. Also, having power gives an enterprise an advantage during negotiations and helps a firm gain favourable terms during transactions. Besides, plenty of power facilitates big transactions thereby increasing the profitability of businesses (p5 para 6). Organizations with have power able to make decisions that affect the entire industry such as cost reduction and supplier manipulation. The use of decision-making power as a senior manager is legitimate to help an enterprise in achieving the objectives and goals. Evidently, a decision made by a senior manager can help resolve the problem in the organization such as the action by Victorian to demand that Coles pay back some fee to grocery suppliers and the act paved the way for the creation of modern deals (p9 para 4).

Q4. If I am requested to delay payment to a supplier to improve the company’s cash position, how I would respond?

The accounting principles include accountability and transparency in transactions. As a chief financial officer, I have the mandate to oversee all the financial transaction and ensure there is compliance with the accounting standards. The financial officer and the accountant play a significant role in the performance measurement and reporting thus their feedback is used in decision making in the organization and the creation of the ethical image to the society. Therefore, I would comply with the ethical standards of accounting procedures thus fail to accept the request of the CEO. I would base my argument on the accounting principles and ethics that guide in financial reporting and transactions to argue that the act would impacts the organization’s reputation giving a biased reflection to the image. Further, I would argue that delaying the payments may lead to the creation of the bad image to the public thereby damaging the reputation of the company or destroying the relationship with the suppliers leading to business interruptions (p15 para 2). Further, strategic management requires that there be integrated reporting and financial transaction to be conducted in a holistic manner.

Q5. The extent of applying developed countries standards of employment condition to less developed countries.

The standards of employment are the parameters that are used to assess the terms of engagement between an employee and employers. The standards may differ between the developed and developing countries due to the difference in resources, awareness, levels of education, quality of lifestyles, countries development rate and the technological advance. I believe I can apply the developed country standards of employment for industrial processes mainly the production of commodities that are made for global markets. The products made for the global market are usually priced highly irrespective of the low costs of production in the less developed countries. Companies such as garment firms may prefer to conduct production in less developed countries to utilize the cheap labor and raw materials thereby exploiting the people (p4 para 2). Therefore, I would use the information on product production costs and the market prices to determine the extent of applying the standards of the developed countries to prevent exploitation of people. Also, I would assess the living standards and the work conditions compared to the value of production and the remuneration structures to apply the standards. The financial reports on the cost of goods sold versus the cost of doing business will help in determining the standards depending on the profit margins (p4 para 1).

Q6. The appropriateness of the company to apply cost leadership model

The management and the consumers play a significant role in determining the prices of commodities. The determination of cost of goods involves the calculation of raw materials used in the production of goods and the labour charges. The manufacturers should act in good faith to help improve the conditions of their suppliers particularly through better payments (p 4 para 3). The customers may choose to pay high prices to acquire products if they feel that the value of the products will benefit the suppliers and help in developing the community. Further, the model of paying suppliers better amounts would assist in creating customer loyalty thereby leading to a growth of the brand and thus increase the sales. I would convince the CEO that the move would establish good relations and create a good image to the consumer leading to increased customer volumes and development of customer loyalty. Further, I would indicate the creation of a healthy business environment that promotes the interest of the organization and the society through the creation of mutual benefit. Further, the strategy leads to the creation of benefiting businesses and encourages high supply leading to increasing in production and promotes the suppliers’ welfare (p4 para 1).

Q7. How to conduct an audit to employees and management

The audit process involves assessment and observation of organizations activities, records, and processes. The process includes the collection of feedback and information from the staffs in an organization. The information captured during the audits may result in changes in the organizations, therefore, the employees or managers may fail to comply or respond due to fear of losing their jobs (p10 para 3). Due to the staffs fear of giving out information, I would employ a strategy of slowly conducting an investigation and capturing the study of the responses to acquire information without jeopardizing the career of the employees. Further, I would offer job protection and promise to hide the identity of the people who provide information. Also, I would eliminate the conflict of interest in the audit and create a framework to protect the people who provide information and report directly to the board to hide my sources of information (p10 para 4).

Q8. Integrated reporting and its change in performance and remuneration system.

Integrated reporting refers to a condition where the all the reports are consolidated to create a comprehensive report. The reporting procedure represents all the stake in the company and reveals all the aspects relating to the business performance. Further, an integrated report reveals the financial performance and indicates the significance of undertaking changes in the organization. Notably, the details in the integrated reports are change driven, and they indicate a holistic way of undertaking performance management. Therefore, integrated reporting may provide a platform that reveals the role of all the stakeholders and help to determine their remuneration amounts depending on their contribution and performance outcomes (p14 para 1).

Q9. Concept of at risk

The remuneration of senior managers in organizations is dependent on their performance. The remuneration amounts determine the performance of the manager’s performance thus the organization must evaluate the contribution of a person before allocating a salary to avoid huge wage bill for the company and to encourage productivity. Moreover, the remunerations should be based on financial targets to avoid the risk of underperformance (p13 para 3). Further, the senior managers have a huge responsibility in the organization thus they should receive high remuneration to encourage high productivity (p13 para2).

Q 10 stakeholders in a company and ethical behaviours of companies

The major stakeholders of a company are the suppliers who ensure there is a constant supply of materials for sale. The success of a company depends on the ability to maintain a supply of commodities and services to meet the demands of the people. Therefore, the suppliers are the supporting pillars of the supermarket business. Further, the suppliers have the ability to regulate the prices of commodities through changing the cost of raw materials and supplies. Moreover, the suppliers determine the quality and variety of suppliers thereby affecting the items that are sold in the supermarkets. It is important to maintain ethical behaviours of companies to ensure they participate in right businesses and ensure the businesses are conducted in good faith. Further ethical behaviour leads to the promotion of proper processes and leads to mutual benefits to all the stakeholders (p15 para 2).

Conclusion

The retail industry is rapidly changing due to the high competition. The businesses engagement in unethical activities results in loss and failure. The managers have a duty to maintain ethical practices and encourage performance. Issues are arising from the business interactions that lack good faith leading to the humiliation of suppliers and employees. The remuneration in organizations is creating challenges mainly due to the performance of the senior managers. The suppliers may experience problems when dealing with the retailers mainly because of the delay of payments. Management practices such as intentional delay of payments and misuse of power to humiliate suppliers lead to the low performance of business. The managers have the role of building ethical culture and structures to ensure compliance with ethics. Further businesses should act in good faith and ensure that all the stakeholders benefit from the transactions. Moreover, managers have the duty to promote good business practices and to grow their suppliers through offering payments on time and giving high prices for supplies.

The human resources and the business processes affect the revenues outcomes creating either losses or profits. The top management in an organization has the mandate to make decisions that involve the entire organization in areas of accounting, human resource management, and business activities. Moreover, the decision-making is critical to the success or failure of an organization thus the individuals given the authority should be of sound mind. The conduct of the management and decisions are dependent on their skills and ethical behaviours. Some top officials such as chief executive officers (CEO), chief financial officer (CFO) and the accountant have significant roles in the profit making and revenue generation in the business. Therefore, failure to execute their duties in a responsible manner may lead to a loss.

The decisions made by the management must be focused on both short-term and long-term development of the business rather than for individual’s interests and it is evident that the outcome depends on the manager’s capability. The business ethics helps in guiding the management in conducting right processes and activities, and in the formulation of healthy organizational behaviour. The compliance with the ethical standard in business helps in promotion of healthy entrepreneurial culture and helps avoid a crisis. Some of the areas where ethics are monitored include accounting, business operations and production, management, human resource management and corporate social responsibilities. The auditors may fail in their work due to the hierarchy of reporting and the authority of the senior managers.

References

ASX Corporate Governance Council (2017). Corporate Governance Principles and Recommendations. pp.2-40.

Australian Competition and Consumer Commission, T. (2017). Food and Grocery Code of Conduct. [online] ACCC. Available at: https://www.accc.gov.au/business/industry-codes/food-and-grocery-code-of-conduct [Accessed 16 May 2017].

Macquarie University (2017). Ethics of profit in the Australian Profit Industry. ACCG315 Case Study.

Vranceanu, R. (2013). Corporate profit, entrepreneurship theory and business ethics. Business Ethics: A European Review, 23(1), pp.50-68.