Explain how this ethical misconduct can occur

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Reference no: EM132821300

Question - Mr. Karim is a Finance Manager at Fly High Berhad, a famous airlines company in Malaysia. Due to COVID-19 pandemic, the performance of the company is now in critical situation. During the top management meeting, the Chief Executive Officer (CEO) of the company, Mr. Najib, expressed his concern to record a loss in the financial statement. He said that something need to be done to avoid reporting loss in the financial year of 2020. He claim that it is much better to report a small profit, rather than reporting a loss in the financial statement. Mr. Najib said that by reporting loss in the financial statement, it will give a bad reputation of the firms and also reduced the share price.

In the meeting, Mr. John suggests to Mr. Karim to prepare a fake document related to the sales of the airline ticket. According to Mr. John, this will increase the sales of the company, thus able to show to the public that the company is doing well. Mr John is also sharing the same concern as Mr Najib since he also holds 200,000 units of the firm shares. Mr. Karim disagree with the idea of Mr. John, but he just keep quite. Mr Karim realized that if he prepare a fake document related to the high sales of the airline ticket, the issue can be easily spotted by the auditor, given that there is no increase in the cash inflow of the company.

Nonetheless, Mr. Maran said that is it better to simply change the accounting techniques rather than to prepare fake documents. As a Finance Manager, Mr. Karim didn't say anything in the meeting. He feels stress and in dilemma about his professional duty and the conflict of interest of the other board members.

At the end of the meeting, Mr Najib give a stare death to Mr. Karim and said, "if you didn't do something, you are potentially to be terminated from the company, since we are now in critical situation and unable to pay your remuneration".

1. State the ethical misconduct that has been proposed by Mr John. Explain how this ethical misconduct can occur?

2. State the ethical misconduct that has been proposed by Mr. Maran. Give two (2) examples that can be categorized as the ethical misconduct suggested by Mr. Maran.

3. Based on the answer in (b) and (c) above, which one of the ethical misconduct that is more detrimental to the firm and state your reason?

4. Give three (3) professional advice to Mr. Karim.

Reference no: EM132821300

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