Ethical Dilemma

Semester 2 - 2015
Individual Assignment (10%)
1. Due Date: Wednesday 30th September (by 4pm) at the SOAF office. Penalty at 10% per day.
2. Must be word-processed, not hand written, word size 12 with ‘Times new roman’ font type and
3. Each answer must be clearly marked by the designated question to which it corresponds.
4. Please list any references (books, articles, web-based material) you use at the end of your
assignment in alphabetical order, using the referencing style seen in academic articles (i.e.
within text references and bibliography, as in the Harvard referencing style).

Part A
The Ethical Dilemma
Australia Steel Company is a large processor of steel products that are manufactured in Sydney,
Australia and sold to customers in Australia and in several other countries. Alan Fazil holds a
CPA and he is the financial controller of Australia Steel. Fazil was aware of the company’s
repair and maintenance policy. He did not know, however, that work-order requests were being
processed based on false and misleading information about the benefits of proposed repair and
maintenance expenditures. This fact came to his attention as a result of the internal auditor’s
annual review of internal accounting controls, including the accounting system for authorising
and recording repair and maintenance transactions.
Fazil realized that repair and maintenance expenditures $100 million amount had a potential
significant effect on the profitability of Australia Steel for the year ended December 31, 2014.
He was concerned that the external auditors would question the accounting for repair and
maintenance expenditures because of the descriptions included in the work orders. Many of the
descriptions made it sound as though a new piece of equipment resulted from the expenditures.
Ironically, all such expenditures were properly expensed, even though the descriptions made it
sound as though the items should have been...