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Lecture # 92

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Lecture # 92

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bwcs1122
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© © All Rights Reserved
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Chapter # 09

Ethical Decision Making Models


Question # 12: {Exam Standard Question}
Cadge is a clothing manufacturer based in Europe that supplies various large retail groups. Over the last two years it has
suffered falls in profits due to the loss of a couple of large contracts and a general fall in demand for its clothes. Industry
opinion is that Cadge has failed to innovate sufficiently in its clothing designs.
A few days ago an unknown factory owner based outside Europe contacted Cadge's Design Director out of the blue. He
introduced himself only as 'Mr Sim', and offered to sell – for what appeared to be a reasonable sum of money – the new up
and coming season's designs belonging to one of Cadge's key competitors who was using Sim's factories to manufacture its
goods. If these designs could be purchased by Cadge and launched onto the market before the competition could launch
theirs, Cadge's profitability for the coming year could significantly increase.
Required:
Analyse, using the American Accounting Association model, the decision of whether to accept Mr Sim's offer.
Question # 13: {Exam Standard Question}
Danelle Davis is one of the audit seniors at MYH and came to see you about an issue that she finds worrisome. Janelle is part
of the audit team that audits Great Gold Limited (GGL), a company that extracts and refines gold at a local mine. She is also on
the audit of Big Machine Limited (BML), a company that leases and services large mining machinery to a number of the gold
mines in the region. During the course of the audits she discovered that Mr. Brent Allen, a director of Great Gold Limited, was
also a director of Big Machine Limited. GGL is leasing a significant percentage of their machinery from BML. There are a couple
of other machinery suppliers in the region who only supply GGL with a small proportion of their machinery needs. The
question that worries Janelle is whether GGL are leasing from BML because Brent Allen has directed them to in order to
increase BML’s profits. She thinks that this may be unethical.
Required:
Apply American Accounting Association (AAA) ethical decision model.

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