I have some difficulties in understanding/ answering some of the questions of ethics for the individual works in my university, sorry i’m not a native english speaker and i’m not a good translater ( my course is in french ) Could you guys take a look at these questions and give me a hints/ explainations /answers about these situations ? Thanks in advance.
Exercice 2 :
- You are the auditor of an aluminum foundry, a French subsidiary of a US medium-sized group. The raw material returns for almost half its cost price. It buys its raw material mainly abroad, payable in foreign currencies, and therefore hedges against changes in the exchange rate by hedging contracts. You find that contracts were deferred beyond their term, namely the date of the cash transaction they covered because, at the time of payment of the purchased material, there was a potential gain to be made Without using the forward hedging contract. These contracts now do not cover anything and are therefore totally at risk. Unfortunately the exchange rate conditions deteriorated and if these contracts were settled today, the company would suffer a significant loss. The issue involves € 2.4 million, representing 3% of sales (risk of loss if the contracts were settled today, if the loss had been recognized at the end of the financial year, the amount would be very close ). What are you doing ? 2) You have known for a long time the director of this company. When the problem is addressed in a summary meeting on accounts, he reminds you that he has extensive experience in managing exchange rates (which you already know, as he was CFO and treasurer before becoming CEO) And assures you that there will come a time when he can liquidate these contracts without loss; Moreover, in his opinion, the profits made justified the risk taken. Finally, he confesses to you, in the tone of confidence, that if he recognizes the loss on these contracts, the results of the business will be lost, at least very little above the break-even and , In any event largely below the targets set by the parent company. It will be necessary to consider a social plan. Do you change your attitude? 3) It is assumed that you refuse to certify the accounts if the loss is not accounted for. Here you receive a phone call from your associate in the Milwaukee office to tell you that it is really not possible that the group management did not anticipate in its profit forecasts this loss of the subsidiary that Is added to the losses of other subsidiaries in countries at risk. If I maintain my position, the Milwaukee office will lose the customer base of the parent company, a significant turnover for that office, and so on. What is your attitude? What attitude do you expect from the management of your firm?