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ACCA Strategic Professional · Advanced Financial Management · The role and responsibility of senior financial executive/advisor

A listed company's finance director is asked by the CEO to delay recognising a large loss until after the annual bonus calculation date. Which action by the finance director best reflects the fundamental ethical principle of integrity?

The finance director should refuse to misstate the results and escalate the matter through governance channels such as the audit committee. Integrity requires honest, straightforward conduct, so deferring a known loss to protect bonuses is unacceptable, and silence or immediate resignation does not resolve the problem.

  1. ADelay the loss as requested because the CEO is senior
  2. BRefuse to misstate the results and escalate the matter through governance channels if pressure continuesCorrect
  3. CDisclose the loss only to the external auditor after the bonuses are paid
  4. DResign immediately without raising the matter with anyone

Explanation

Integrity requires straightforward and honest conduct, so the finance director must not take part in misleading reporting. Where pressure persists, the matter should be escalated, for example to the audit committee. Complying with the CEO breaches integrity, and staying silent or resigning without raising it fails to address the problem.

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