CONFIDENTIAL ACIJUN 2018/CRG650/520 aa) ‘S ZS UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION COURSE : BUSINESS ETHICS AND CORPORATE GOVERNANCE COURSE CODE : CRG650/520 EXAMINATION : JUNE 2018 TIME : 3HOURS INSTRUCTIONS TO CANDIDATES 1 This question paper consists of two (2) parts: PART A (4 Questions) PART B (2 Questions) 2 ‘Answer any THREE (3) questions from PART A and ALL questions from PART B in the ‘Answer Booklet, Start each answer on a new page. 3 Do not bring any material into the examination room unless permission is given by the invigilator. 4 Please check to make sure that this examination pack consists of i) the Question Paper ji) an Answer Booklet — provided by the Faculty 6. Answer ALL questions in English, DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO This examination paper consists of 6 printed pages (© Hak Cipta Universit! Teknologi MARA CONFIDENTIALCONFIDENTIAL 2 ACIJUN 2018/CRGS50/520 PARTA QUESTION 1 Siesco is a multinational conglomerate company. In June 2008, it has been caught due to widespread corruption and bribery allegations. The regulatory authority charged seven former Siesco executives with violating the act for their involvement in the company's decade-long bribery scheme. As a fallout of this scandal, the Chief Executive Officer and the Chairman had to resign even though they were not directly implicated. The scandal has shaken the topmost ranks of Siesco management, some of whom a former Chief Financial Officer and supervisory board member are being prosecuted by related authorities individually. The case has also produced public statements of the company's renewed commitment to more ethical behaviour. Required: a. State any four (4) factors that would affect public expectations for ethical business behavior. (4 marks) b. From the above scenario, explain the stake for Siesco and its shareholders. (4 marks) c. Based on the Consequentialism theory, analyze the ethicality of the action of the seven former Siesco executives who have violated the act through their involvement in the company's decade-long bribery scheme. (6 marks) d. Explain Siesco’s action based on the axioms of Islamic ethical philosophy; Equilibrium and Responsibility. (6 marks) (Total: 20 marks) QUESTION 2 William, a newly appointed manager, learns that a team of internal auditors from his firm's home office will descend on his factory in two days. He prepares his staff the best that he can. The day before the auditors arrive, one of his assistants discovers some distressing News. It appears that, John, a 45-year veteran of the plant, has been systematically altering accounts for years. John has been shipping products to customers without billing them and billing customers without shipping anything. On balance, William finds, no money has been lost or gained; things balance out in the end. John's adjustments indirectly have benefited William, who has already been complimented by higher-ups for his astute forecasts and for meeting his targets so accurately. But William also knows that if these Practices were to come to light, John would be fired instantly. He himself, though ignorance of the practice until now, might have some tough explanation to do. After all, for years John has falsifying records and misstating corporate revenues to management, shareholders, and the Inland Revenue, (© Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL 3 ACIJUN 2018/CRG650/520 Required: a. Explain briefly the ethical dilemma faced by William and the consequences of his action, (4 marks) b. Discuss briefly John's behavior from the Islamic perspective based the elements of Devil and Sage as described by Al-Ghazall (4 marks) ¢. Should William put on the veil of ignorance in fuffiling his duties? Explain William's situation according to Veil of Ignorance by Rawls. (6 marks) d. Evaluate John’s action based on Stage 4 (Law and Order) of Kohlberg Cognitive Moral Reasoning (6 marks) (Total: 20 marks) QUESTION 3 Workplace ethics is a crucial part of employment. Every business regardless of what industry itis in, has certain guidelines to which its employees must adhere. It also frequently outlines such aspects in employee's handbook. Corporate Social Responsibility (CSR) is seen as cone of the various efforts undertaken by companies in instiling good ethical conduct among employees. CSR programs consider the welfare of employees. It can be used by a company to recruit and retain employees. A company with a strong CSR has more motivated and ethical employees. Required: a. Fair treatment of employees at workplace is not just a moral responsibility. It is also necessary to ensure maximum company growth. Explain two (2) negative consequences if discrimination among employees exists at workplace. (5 marks) CSR reporting enhances the contents of corporate annual report. By providing report on CSR activities together with other additional disclosures, it may reduce the gaps between company and its key stakeholders. Discuss any three (3) motivations for engaging in CSR reporting among listed companies. (6 marks) . Bursa Malaysia plays a significant role in enhancing corporate transparency on environmental, social and corporate governance-related issues among companies in Malaysia. In 2006, Bursa Malaysia has launched the CSR Framework. Explain the rationale of such launching towards the aspect of CSR reporting by Malaysian public listed companies. (3 marks) (© Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL, 4 ACIJUN 2018/CRG650/520 d. tis essential for professional accountants to follow the Corporate Code of Conduct. However, there are issues which are not usually governed in Corporate Code of Conduct. Explain any three (3) issues that are not usually resolved in Corporate Codes of Conduct. (6 marks) (Total: 20 marks) QUESTION 4 According to Fama and Jensen (1983) corporate governance mechanism exists to protect and enhance the interests of shareholders of business enterprises by ensuring the investors a return on their investments. A Mc Kinsey survey (2000) found that the majority of investors would pay a premium for the shares of a well-governed company. Essentially, they discovered that investors are willing to pay more for well-governed than for pooriy-governed Malaysian companies with a comparable financial performance. A good corporate governance practice is believed to reflect the image and value of a company. It becomes ‘one way to attract and restore the investors’ confidence. McKinsey's Emerging Markets Investors Opinion Survey (2001) found that investors in Asian companies are concerned about board practices as much as or more than financial issues. In every country surveyed, investors stated that they would pay a premium for a well-governed company, as high as in some emerging markets. Required: a. Explain briefly any three (3) roles of the chairman in corporate governance. (6 marks) b. Explain any three (3) of the principle responsibilities of the board of directors as listed in the Malaysian Code on Corporate Governance (MCCG). (6 marks) ©. Discuss the rationales for the establishments of Nomination Committee and Remuneration Committee (8 marks) (Total: 20 marks) (© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL,CONFIDENTIAL 5 ACIJUN 2018/CRGB50/520 PARTB Answer ALL questions. QUESTION 4 The Challenges of a Professional ‘Adam is an external auditor of a hospital trust. The trust expects to receive enhanced status in the near future. By then, it will afford autonomy and provide opportunities to pursue many potential profitable projects. As the trust passed its financial year end, some unforeseen liabilities came to light. The trust's director of finance, Syahmi and its chief executive, Shukri had reported to the board of trustees and the regulator that the trust would break even for the year. The director of finance then made a number of accounting adjustments in order to ensure that the trust would meet its financial responsibilities, including the requirement to break even each and every year. The adjustments required changing the accounting policy in respect of stock, which had previously been valued on a ‘first in, first out’ basis as specified by International Financial Reporting Standards. In addition, certain salaries have been capitalized, and the trust has failed to account for its share of liabilities under a partnership agreement with a local authority, which has yet to prepare the memorandum account. The adjustments come to Adam’s attention during the audit process. He cannot accept that they are correct. As those are material, if the trust does not amend its accounts, he will have to qualify his audit opinion on the year end accounts. When Adam discusses the issues with the director of finance, he is emphatic that his view represents a legitimate interpretation of accounting policy. Syahmi indicates that if Adam does not accept it, he will ensure that the trust will appoint different auditors next year. Syahmi also threatens to tell the local newspaper that Adam's firm is determined to make the trust's financial position looks worse than itis. (Consultative Committee of Accountancy Body's Case Study) Required: a. ° Describe the fiduciary duty of professional accountants. (4 marks) With regards to the potential judgement made by Adam, discuss the fundamental principles in the Intemational Federation of Accountants (IFAC) Code of Ethics, namely integrity, Objectivity, Professional Competency. (10 marks) Assuming Adam does not know anything about deontology theory, you are to advise him in making the best decisions and judgements from the perspective of a deontologist. (6 marks) (Total: 20 marks) Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL, 6 ACIJUN 2018/CRG650/520 QUESTION 2 Harassment at Workplace Daisy, is a newly hired staff in the Production Department of a medium-sized company. As the first woman selected for this production training position, Daisy takes her work very seriously. In the first two months, she performs her duties very well, However lately, her boss, Mr. Johny, has noticed a change in Daisy. She seems to be more tense and uneasy. At times she even does not concentrate on her work as conscientiously as she previously does. Daisy is actually in dilemma with the problem she is facing at workplace. She has been continually harassed by Eddie, a co-worker. At first, she tries ignoring his jokes and ‘sexual banter. However, his persistence has caused Daisy to have very uncomfortable feelings with such treatments. Daisy looks into the employee's handbook concerning harassment policies and finds none. She really does not know what to do. Finally, after noticing Daisy was continually declining work, Mr. Johny asked her what was bothering her. She tells him the problem and shows him information concerning the laws dealing with harassment in the workplace. She also says that she is considering taking action against Eddie if his actions continue. Mr. Johny feels bad as he is totally unaware of the problem, but agrees that something should be done. (Arthur Andersen & Co's Case Study) Required: a e With reference to the above case, define your understanding on harassment at workplace. (4 marks) In relation to the above case, outline the appropriate type of justice to be given to Eddie, the harasser. (4 marks) With reference to the last sentence as per the above case, explain briefly Mr. Johny's action based on the fundamental interests of stakeholders; Well-offness, Faimess and Right. (6 marks) Discuss three (3) ways on how a firm can ensure that it does not engage in sexual harassment at the workplace. (6 marks) (Total: 20 marks) END OF QUESTION PAPER Hak Cipta Universiti Toknologi MARA, CONFIDENTIAL