ACCA Strategic Professional · Strategic Business Reporting (International) · Professional and ethical behaviour in corporate reporting
Group accountant Wei prepares consolidation adjustments for Zenith Group. The finance director instructs her to exclude a subsidiary's large unrealised intragroup profit in inventory from elimination so that group profit meets a bonus target. Wei refuses, escalates to the audit committee, and is then threatened with dismissal. Which response is MOST appropriate?
Wei should keep refusing, document events, obtain legal and professional advice on her protection, consider resigning if unresolved, and consider any legal duty to report. IFRS 10 requires intragroup profit elimination, and following a superior's instruction does not remove her personal responsibility for misleading reporting.
- AComply, since the instruction comes from a senior director and responsibility transfers to him
- BContinue to refuse, document the matter, seek legal and professional advice on her rights, and consider resigning if the issue cannot be resolved, while considering any legal duty to reportCorrect
- CEliminate the profit only in the consolidation spreadsheet and tell nobody
- DReport to the press first to protect herself from dismissal
Explanation
IFRS 10 requires full elimination of unrealised intragroup profit, so the instruction is a breach. Wei should not be associated with misleading information, should document, seek advice, and consider resignation and legal reporting duties. Responsibility does not transfer to the director, and silently working around the instruction without disclosure does not resolve the conflict.
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