Introduction

PPLC Ltd. (PPLC) was a Malaysian company with lumber business which had decides to set up a joint venture with foreign investment company in China, YBLC Ltd. (YBLC). Mr T was the financial controller that had been asked for altering the profit and loss position from loss to profit by the general manager, Mr Zhang, representing the interest of the Chinese government, who was also a government official supervising foreign joint venture company. The alteration was made in order for Mr Lee the economic officer could capture the good picture in his report of joint venture performance under his charge. The issue arise when there are decision that need to be decide by Mr T whether to modified the YBLC financial report or not. It show the scenario which might be face by the account who is work in a foreign country in joint venture. Beside that it also illustrate the importance of corporate governance in the business world which to keep the best practices of faithfulness to business and personal ethics.

Should Mr T modify the YBLC financial report?

As a financial controller, Mr T should not modified the YBLC financial report which from loss to profit. Mr T should consider possibility of bad impact that might occurs if there are alternation had been made. There are several reasons why Mr T should not modified the financial statement. First reason is about the code of practices as an accountant. If Mr T modifies the financial statement, he may lose his practices license because of changing the accounting report without basis. We know that there are standard that need to be follow in preparing the account such that international accounting standards (IAS) and Malaysia accounting standard which based on IAS. Even thought YBLC is a foreign investment company in China but in China it selves adopted the same standard. Mr T cannot simply ignore the entire standard in order to fulfill Mr Lee wants which to alter the profit and loss from loss to profit. Mr T should maintain Code of Ethics and Standard of Professional Conduct so that he will not lose his practice license and his reputation will not affect.

Other than that, if we can see further there are personal interest arise when Mr Lee ask Mr T to alter the financial position. Mr Lee does not want the joint venture having a loss giving the bad impact toward his career. As we know that Mr Lee was a government official supervising foreign joint venture company, a good picture in his report of joint venture performance under his charge will be his priority. A good record to show will make Mr Lee get a fast promotion. However, although a professional code of conduct exists to deal with the behavior of the accounting profession, an individuals behavior is still affected by his or her personal values, because behavior is influenced by personal values and not by a code of ethics (Eaton & Giacomino, 2001). From there we can see that Mr Lee want Mr T to alter the financial statement was influenced by his personal value which he wants it for his personal benefits. As a good account Mr T should not help Mr Lee for altering the financial statement because it is not for the best interest for the company but more on the personal interest.

The failure of a company is not simply a matter of accounting and auditing but the involvement of a convergence of factors including personal values, integrity and ethics (Akers, Eaton & Giacomino, 2004). Due to this if Mr T alters the financial statement it will actually give bad impact to the company. As we know that most of investor will rely on the financial position of the company in order to make an investment. If there any alteration had been made it show the unfair act toward the investors. Besides that, investor can sued the company if they know the truth about the alteration of the companys financial position. It will give the negative impact if there is no longer trust from the investor. Other than that, it will difficult to earn trust from auditor and it might give negative impact to the company if the auditor gives a qualified report due to fraud that had been done. As we know that alteration of financial statement is not only involve the financial department but it also involving the shareholder, investor and other third party. So that Mr T should not modify the financial statement because due to several consequences that had been discussed early. Mr T should think for the sake of the company and also for his profession as an accountant.

Should HQ know about the problem?

HQ should know about the problem because altering the financial statement is not a small problem it will involve many party and also give a bad reputation to the person who was responsible for altering it and also give bad impact towards the company. There will be several reasons why HQ should know about the problem. When there are problem arise in the company top management should take an action in order to sort out the problem. According to Finkelstein (1992), top managers power plays a key role in strategic decision making. That is why HQ should know about the problem, Mr T should report to the HQ regarding the demand from Mr Lee for altering the financial statement. So that, the top management which is HQ can takes an action towards Mr Lee. For example, HQ can discuss with the government regarding the issues and government will appoint another officer by replacing Mr Lee. If Mr T does not report to the HQ, if there are any bad things happen HQ will not responsible and only liable for Mr T by himself for breach the code of professional ethics. We know that the top management plays an important role in performing the decision making, so that is why Mr T should report to HQ and let the HQ decide on what should be done to Mr Lees demand. Beside that HQ should know about the problem in order to protect other party such that shareholder, supplier and also customer. As we know that they rely on the financial report of the company for making performance on the companys contract and also as a medium of investment advice. If HQ does not know anything about the problem they might lose the trust from those party especially shareholder. Shareholder will put the blame on them because it was their responsible to protect the shareholder interest. If there are no trusts on the HQ, it really is affect the performance of the company and become less effective because there will the conflict of interest between them. In order for HQ play their good role for protecting those party, they should know all about the problem arise in the company. So that they can find a solution for protect those party from become a victim who that rely on the fake financial reporting and also maintain the trust from the shareholder.

Other than that, HQ should know about the problem because they can avoid destroying the careers of people involved in fraudulent financial statement. As we know that if Mr T follows what Mr Lee wants, it will give a bad impact toward the professional career as accountant. If HQ get involve in this problem they can prevent the fraudulent of financial statement and also protect Mr T career as a financial controller of the company. HQ also needs to help Mr T in order to make a good decision which will consider about the best interest of company and also prevent other party to take advantage for their own benefits. Besides that, the employees also become more reliable to top management which is HQ. A good leader need to have a trust from their subordinate and that is most important thing that HQ needs to have. So that Mr T should report the problem to HQ because HQ need to know about the problem in order to find other alternative will give a positive impact to the company and also to the party that related to the company business.

Business operation should adhere to stakeholder policy. However, cultural and other surrounding factor may negatively affect the business. Discuss of the extent where business should response to the policy requirement.

Different country has different culture and other surrounding factor. Some country, government plays the important role in the business. The business should response to the policy requirement as long as the business operation comply with the law and regulation and also operate in fair dealing. The business should response to those policy requirements if the operation still complies with the law and regulation. In business there are some law and regulation that need to be followed. For example in Malaysia, Company Act 1965, in China there are Chinas Company Law and also Laws for foreign invested company. Other than that there also standard that need to be followed for recording all the transaction and accounting purposes. As long as the companies comply with the law and regulation, they can decide to follow the policy requirement. If there are some policy that actually breaches the law and regulation, the company should not response towards the policy requirement. Beside that the business also can response if the policy requirement required the company to operate in a fair dealing. Fair dealing means that the company built the relationship with other parties based on the honesty, integrity, mutual trust and also ethical behavior. If the policy required the company to deal fair with customer and supplier, the company should response on it because it giving a good situation which fair to the business and other party. There will no harm for other parties in order to fulfill certain interest. Company should not response if the policy required the business operation become unfair by taking the advantages from others, manipulating and other unfair dealing practices. It will actually give a bad impact to the business in the future. So that, the business can response to the policy requirement as long as the policy required the business operation complying with the law and regulation and also dealing with other in fair.

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