Table of Contents

Ethical issues - redundancies - legality and compliance with employment law – Transparency, Effect
Fairness and share options....................................................................................................................1
Ethical issues arising for Health and Safety – no clear on product quality changed and confidentiality
of email and not intended to sent.........................................................................................................3
Ethical issues with governance issues arising from Transparency, conflict of interest and self-
interest around working after takeover - actions to be, and by ICF in response..............................5
Insider trading of company own shares – self interest, integrity, Acting illegally, acting legally – sits
on board and trading shares..................................................................................................................7
Ethics - Transparency, Effect, Fairness – Assurance, Legal issue personal reasons fraudulent..............9
Transparency, Effect, Fairness - Recorded called, self interest, directors influence on FS...................11
Ethics – Professional scepticism – Transparency, Effect, Fairness, illegal transaction, honesty and
integrity,..............................................................................................................................................13
Ethics Legality – Bribery, Transparency, Independence,..................................................................15
Ethics - assurance engagement ISAE 3400 - intimidation, conflict of interest and self-interest......17
Ethics – Faulty products, compensation and compensation, legal advise, Transparency, self interest
and impact, Fairness, honesty.............................................................................................................19
Close personal relationship – need facts – Director not best interest of company – reverse decision
– intimidation – appointment of suppliers EE winning contract......................................................22
Litigation – sued + not disclosing + preform non audit work/safeguard + CEO integrity – lifestyle
and intimidation..............................................................................................................................24
Ethical issues - redundancies - legality and compliance with
employment law – Transparency, Effect Fairness and share options
Ethics pertains to whether a particular behaviour is deemed acceptable in the context under
consideration. In short, it is 'doing the right thing'.

In making any ethical evaluation it is first necessary to establish the facts. In this case, it would seem
that the facts are reasonably clear in terms of what Harry Harris and Wooster intend to do, although
there may be some doubt about what it is legally able to do.

The issue of legality and compliance with employment law needs to be considered and legal advice
taken by Wooster. F Wooster is acting contrary to employment law this is a strong indication of an
unethical stance.

This may prevent the redundancies/dismissals or, as a minimum, increase the cost to Wooster from
legal actions against the company by the employees being dismissed or made redundant.

There is another issue of legality in that Harry, in his role as chairman, is not acting in the best
interests of the company, or shareholders as a body, but fora section of shareholders. This could be
a breach of his fiduciary duty as a director. Legal advice should be taken.

Separate legal advice is needed tor the directors, who are officers of the company, and the senior
managers, who are employees.

If the redundancies/dismissals are deemed, on the basis of legal advice, to be within the law then
the ethical aspects still need to be considered.

In this respect, it is helpful to apply the Institute of Business Ethics three tests:

1. Transparency
2. Effect
3. Fairness

Transparency- would StockFin mind people (existing customers, suppliers, employees) knowing that
these redundancies/dismissals have taken place and the real reason for making them?

Moreover, was it made transparent to managers at the time of granting the options that it was
possible that redundancies/dismissals could take place, which would prevent the options vesting?

At this stage, the redundancies/dismissals decision is confidential, but will become public knowledge
on announcement. What will be less clear is that the underlying reason is to prevent share options
vesting to the benefit of Stockhin.

The issue of poor performance in this respect appears more to reduce transparency with a false
reason rather than increase transparency.

It is important that GW reports with objectivity on the performance of Wooster and not become
subject to any intimidation threat to state that there has been poor performance, where it does not
believe this to be the case.

The reason that there are now fewer people to manage so we need fewer managers is, at best, only
partial, as the number of employees fell by 20% (1,500 to 1,200) from 20X3 to 20X5, but the number
of managers is being reduced much more drastically by 60%. This indicates this is perhaps more of
an excuse, than a genuine reason, for the redundancies/dismissals.

The ethical tests of openness and transparency do not therefore appear to have been met by
Stockfin.

Effect-whom does the decision to make redundancies/dismissals affect or hurt? There are
substantial effects on the managers concerned who suffer in three ways:

Their options will not vest on 31 December 20X7 and there is therefore a significant potential loss of
value in their investment.

They will lose their jobs and future income and they may suffer damage to their reputations

The value of the 10% shareholding for which they subscribed may be adversely affected by this
decision.

The StockFin shareholders would be favourably affected, as their shareholding in Wooster will not be
diluted and will therefore increase in value.

Value would therefore be transferred from Wooster managers to StockFin owners as a result of the
redundancies/dismissals.

It may however be that the value of Wooster shares as a whole is largely unaffected if managers can
be adequately laced.

Fairness - would the redundancies/dismissals be considered fair by those affected?

Much would depend what was included in the option contract and the understanding that was given
to managers at the time of granting about the possibility of redundancies or dismissals, which could
prevent the options vesting.

lf it was not made clear at the grant date, then managers may feel it unfair they have been
incentivised by a possibility that is not now going to occur. In this respect StockFin owners would
have gained significant and unfair benefits.

If it had always been intended from granting that redundancies/dismissals would occur to prevent
the options vesting then this is a more extreme ethical case, amounting to deception by StockFin in
order to make a gain. The ethical principles here are honesty and integrity but may also amount to a
different type of fraudulent action. There is no suggestion of this in Harry's note, but if this turns out
to be the case, then further legal advice would be needed.

Actions in response to ethical issues GW's initial actions should be:

Make clear that the report on performance will be an objective assessment and will be unaffected by
any purpose that Harry would wish to use it for.

Suggest that the company takes legal advice, as to whether Harry's intended actions would be illegal.
If such advice deems they would be illegal, inform Harry that if they are implemented then GW will
cease to act for Wooster and inform the Wooster board of the reasons
Ethical issues arising for Health and Safety – no clear on product
quality changed and confidentiality of email and not intended to sent
Ethics pertains to whether a particular behaviour is deemed acceptable in the context under
consideration.

In making any ethical evaluation it is first necessary to establish the facts. In this case, the evidence
of the intention is in the email and seems clear.

However, it relates to only one member of the board and there is no evidence that this is a general
view of the board or that a decision has been taken to act in this way.

Also no actual actions yet appear to have taken place in relation to the issues in the email.

It seems clear that the email was confidential and not intended to be sent to Mita.

Turning to the individual matters in the email.

Use of low quality wheat

The mixture of different qualities of wheat is, subject to the legality of health and safety, a
commercial decision.

However, the key ethical issue is one of transparency. It is not so much the action that lower grade
wheat is intended to be used, but the fact that this has not been disclosed. This may imply there is
an intention to deceive SaveLow into thinking there has been no change in quality. Ihis could amount
to defrauding SaveLow it there is a deliberate attempt to deliver something which was not agreed
but which is being passed off as what was agreed.

The wording of the contact is relevant but there may be implied understandings that go beyond the
legal conditions.

In this respect, it is a question of business trust and whether it was understood by both parties that
there would be no change in the physical nature of the product despite the change in price or that
any change should be notified in advance.

The question of effect is also relevant. If the change in average quality of wheat is very small it could
be argued that there is no tangible consequence to the change in wheat quality being made. Even it
this were the case however the fact that it has not been disclosed to SaveLow means that business
trust could be damaged.

Receipt of the email

The key ethical issue here is one of confidentiality. Jason has inadvertently breached confidentiality
such that Mita and now JCF, have confidential information that they should not have received.

From the perspective of JCF reading the confidential email may have also been inadvertent in that it
may not have been obvious until the email was read that it was not meant to be sent to Mita. In this
sense, it would not have been a deliberate attempt to breach confidentiality.
Actions

Use of low quality wheat

An initial action would be to ensure that the terms of the contract are clear regarding the quality of
the wheat to be used, who is to decide the appropriate level of quality and any disclosure of the
change. Compliance with the terms of the contract would be an appropriate ethical defence for BBB
so long as the contract is clear and there is a common understanding.

Some of the obligation would be on SaveLow to have quality assurance that would ascertain their
satisfaction, and their customers satisfaction, with the quality of the bread produced, rather than
the quality of one input into making the bread.

If there is doubt, then disclosure of the process by which wheat quality is determined would ensure
transparency rather than disclosing the difference in quality of every wheat purchase.

Receipt of the email

In order to make known the fact that JCF inadvertently holds confidential information, and to satisfy
transparency obligations, Mita should disclose to the BBB board that she has received and read the
email.

Given that it has been read, Mita should also confront the BBB board about how it intends to
respond to Jason's suggestions and whether there is to be an intention to deceive or defraud
SaveLow. If this is the case then JCF should consider resigning.
Ethical issues with governance issues arising from Transparency,
conflict of interest and self-interest around working after takeover -
actions to be, and by ICF in response
Ethics pertains to whether a particular behaviour is deemed acceptable in the context under
consideration. In short, it is 'doing the right thing'

In making any ethical evaluation, it is first necessary to establish the facts. In this case, it would seem
that the source of information is from the Ultima CEO. Given the current negotiations with Ultima its
CEO may not be an entirely reliable source of information.

Also, it would seem that Geoff is in the process of arranging a new contract with Ultima' so nothing
appears to be signed or finalised and there may be reasons for Geoff suggesting he might work as a
consultant. These facts need to be verified.

If, after investigation, it is true that Geoff intends to sign a consulting contract, then the primary
ethical issues appear to be transparency and conflict of interest.

lt would appear that, although Geoff has disclosed to the GJ board that he wants to work only part
time for GJ after the MBO, he did not disclose the reasons. In particular, given that Ultima is in
negotiations with the GJ management team and other key stakeholders, it is a matter of significance
that any dealings with Ultima should be disclosed to the other three members of the GJ board, as a
minimum.

The question of disclosure to ICF is more tenuous but, given the nature of the joint interests in the
MBO deal with Ultima, then this disclosure to ICF may also be expected as a matter of business trust

A conflict of interest arises for Geoff in that his future income will come partly from the success of
the GJ MBO, but also partly from Ultima. If Geoff could negotiate a lower consideration than £40
million this would be beneficial to the GJ management team but would harm Ultima.

In so doing, Geoff may teel his future consulting contract may be jeopardised, incentivising him not
to push for the best deal tor the GJ management team in negotiating the amount of the
consideration.

If the actions of Geoff are a deliberate attempt to reduce the consideration in return for payments
from Ultima then, if this is successfully carried through, this may be illegal and legal advice should be
taken.

However, given that the other board members are now aware of the issues and nothing has yet
been signed for Geoff's contract and for the MBO then this now seems unlikely, even if originally
intended by Geoff.

Other ethical issues are

Effect-whom does the issue affect? if the terms of the MBO deal are unduly favourable to Ultima,
then some stakeholders may lose out (eg, other GJ directors, ICF and Farmley Bank who may earn
lower returns and could be at more risk).

Fairness- would the arrangement be considered fair by those affected? Clearly, if the negotiated
MBO agreement is influenced by the personal interests of Geoff, then those adversely affected may
regard this as unfair in not satisfying arm's length conditions. However, the greatest unfairness may
be seen with respect to the other three GJ directors who are entitled to trust Geoff as colleagues
sharing investment interests.

ICF and Farmley Bank should have a degree of professional scepticism of other stakeholders as well
as Ultima in establishing the facts (eg, through due diligence) and need to make their own
judgements, but nevertheless a degree of business trust may be expected from Geoff.

Actions

As an ICAEW Chartered Accountant, Geoff is bound by the CAEW ethical code. If there is a belief that
the transaction is illegal, ICF should obtain advice (eg, calling the ICAEW helpline). In this case, they
should not speak to Geoff as this may be tipping ott.

If advice is received that this is not an illegal transaction, but it may be unethical, then Kevin should
raise the issue formally at a GJ board meeting and ask Geoff for an explanation. Geoff’s response
should be recorded in the minutes.

It may be that the GJ board no longer wants Geoff to be part of the MBO team, but this would need
to be agreed with other stakeholders and Ultima, unless the three other GJ board members want to
withdraw altogether from the deal.

As part of business trust and transparency the GJ board should inform ICF and Farmley Bank of what
has occurred.

From C's perspective, business trust in one of the key MBO management team may be damaged. In
the extreme they could withdraw trom the deal or only continue it Geoff is excluded from the deal.

As an ICAEW Chartered Accountant I should consider reporting Geoff to the ethics committee if on
the basis of the established facts there is a reasonable suspicion that there has been an ethical, legal
or other disciplinary breach Geoff.
Insider trading of company own shares – self interest, integrity,
Acting illegally, acting legally – sits on board and trading shares
Issue with financial analyst

If possible establish the facts – the anonymous and self-interested source (financial analyst) casts
doubt over the validity of the claims. Matt should not initially be the source of establishing the facts
to avoid possible tipping off.

Honesty and integrity – if Matt is deliberately misleading the financial analyst this raises significant
issues of his honesty and integrity. Confidentiality - even if Matt was telling the truth to the financial
analyst (or believed he was) then there is a breach of confidentiality.

Self interest - if Matt was deliberately trying to push up share price so he could sell his own shares at
a higher price this is a self-interest threat.

Self-interest v fiduciary duty - directors are required to act in the interests of the company. If Matt is
passing on confidential information about Rudder, this can damage the company (eg, reputational
damage, share price effects) in favour of Matt’s own self interests.

Share trading (ignoring issue of financial analyst

It is legitimate for directors to trade their own shares. Directors have more information than the
public to trade at the best time (eg, buying before good news is released; selling before bad news is
released). Directors’ trading in this way may be putting selfinterest before the company’s interests.
Their trading may also act as a signal to financial markets.

The table of trades shows that Matt bought 27,000 shares shortly before the public announcement
of the winning of the new contract in York, but after the date that this was known internally. He
therefore gained from the share price rise of £1.40 on the day of announcement.

Conversely, Matt sold 32,000 shares shortly before the public announcement of a profit warning for
2021 financial year. He therefore avoided the £2.60 fall in share price on the day of the
announcement.

Although Matt’s share trades in 2021 were substantial he still owns 160,000 shares at 31 December
2021 so, if he has sought self-interest, he has not sought to maximum self-interest by selling all his
shares. However, this may have been to avoid drawing attention to himself and avoid transparency
for his actions.

Actions

Review the legal advice before challenging Matt.

Acting illegally

If the legal advice is that Matt has engaged in fraud or money laundering, then seek further legal
advice on how this should be appropriately reported (eg, to SOCE). In this case, Matt should not be
challenged or informed of the situation, as this may amount to tipping off.

Examine board minutes and speak to other directors to establish who knew about Matt’s share
trades and whether they are in breach any directors’ agreement on such trades.

Check the terms of Matt’s contract of employment to ascertain whether there is a contract breach.
If the shares were awarded as part of a director remunerations scheme check that Matt’s actions are
consistent with its terms.

Not acting illegally

If the legal advice is that Matt has not acted illegally, then seek an explanation from Matt for: (i) the
claimed actions in the anonymous statement (ii) an explanation the nature and timing of his trades
in Rudder shares.

Even if Matt has not acted illegally, he may have breached Stock Exchange regulations in the trades
themselves or in the nature and timing of the disclosures of his trades to the Stock Exchange so the
information can be in the public domain.

The share trades should be disclosed in the Directors’ Remuneration Report within the Annual
Report.

Summary

Matt is accountable to the board. If Matt has deliberately acted illegally or contrary to Stock
Exchange regulations or breached confidentiality (legally or not) then it may be appropriate to ask
him to resign

If Matt has breached internal rules, then these should be disclosed and the board should consider
any action.

If there is deemed to be lack of clarity over director share trade procedures, then the board should
draw up a formal agreement setting out the conditions, approvals and disclosures required for
director share trades and public information disclosures.
Ethics - Transparency, Effect, Fairness – Assurance, Legal issue
personal reasons fraudulent.
Ethics pertains to whether a particular behaviour is deemed acceptable in the context under
consideration. In short, it is 'doing the right thing'.

In making any ethical evaluation it is first necessary to establish the facts. In this case, it would seem
that the facts are reasonably clear in that Helen appears to have admitted to Daniel what she has
done.

What is less clear is whether Helen's assurances are valid in asserting that her private use is not in
conflict with ABS's business interests. This needs to be evidenced and established. It is difficult to see
how this can happen without the wider involvement of the board.

It also needs to be established that no ABS data, or that of its customers, was accessed, used or
transferred. Again, it is difficult to see how this can happen without the wider involvement of the
board.

In respect of both the above issues, a degree of professional scepticism needs to be applied to
Helen's assurances as there is a potential conflict of interest.

Legality issues are important in that use of company assets for personal reasons is potentially
fraudulent. However, as the original writer of the program, it needs to be established that Helen
does not have any continuing right to its use under the acquisition agreement. Legal Advice needs to
be taken.

If it is fraudulent then Daniel has a duty to disclose these facts to the board. If Daniel does not do so,
then l have a legal duty to make disclosure to the board or to the National Crime Agency (NCA).

There is another issue of legality in that Daniel is not acting in the best interests of the company. This
could be a breach of his fiduciary duty as a director. Legal advice should be taken.

It is helpful to apply the Institute of Business Ethics three tests:

 Transparency
 Effect
 Fairness

Transparency - would Daniel and Helen mind people (board members, existing customers, suppliers,
employees) knowing that one of ABS s data analytics programs had been used for private purposes
by Helen?

It is clear that if the action is illegal and Helen loses her job then she would not want transparency. It
would also appear that in an effort to protect Helen, Daniel also would not want transparency. His
motivation may be for the benefit of the company in benefiting from Helen's services, but the board
could also make a similar judgement, and would have the authority to do so. There may be personal
motivation for Daniel wanting to keep Helen which could be damaged by transparency.

In attempting to keep the matter confidential to Daniel alone, the ethical tests of openness and
transparency do not therefore appear to have been met.
Effect-whom does the use of ABS's data analytics program for private purposes affect or hurt? Also,
whom does non-disclosure harm or hurt?

If Helen's assertions are correct that her private use is not in conflict with ABS's business interests
then any harm may be limited, particularly as she has agreed not to access the program in future.

Similarly, if Helen's assertions are correct that no ABS data, or that of its customers, was accessed,
used or transferred then any harm may be limited, although such actions may cause concern
amongst customers if it became apparent there was potential access.

Fairness- could the use of an ABS data analytics program for private purposes be considered fair by
those affected?

Much would depend what the access was used for. If an unfair advantage was gained due to the
access then this may be considered unfair by Helen's rivals. Similarly, if Helen took advantage of the
access, whereas other employees did not, or could not, this may be seen as an unfair benefit by
other employees.

Actions in response to ethical issues

Daniel's initial actions should be:

Report the matter to the full board who are authorised to make a decision about Helen's behaviour.

Following full disclosure, ensure, as far as possible, that the facts are established: (a) that Helen's
private use is not in conflict with ABS's business interests; and (b) no ABS data, or that of it
customers, was accessed, used or transterred.

Suggest that the company takes legal advice, as to whether Helen's actions would be illegal, either
being criminal or in breach of contract.
Transparency, Effect, Fairness - Recorded called, self interest,
directors influence on FS
Ethics pertains to whether a particular behaviour is deemed acceptable in the context under
consideration. In short, it is 'doing the right thing'.

Rohit and Katy

In making any ethical evaluation it is first necessary to establish the facts. In this case, it would seem
that the facts with respect to the content of the overheard conversation are reasonably clear as they
have been recorded on Hannah's smartphone. Ihe actions that may have taken place as a result ot
that conversation are less clear.

The central ethical threat is one of self-interest. Directors have a legal fiduciary duty to act in the
interests the company and shareholders as a body. Voting for decisions on behalf of the company to
serve Rohit's and Katy's own personal self-interest may be a breach of this legal duty and ethical
principle. For example, using cash to repurchase shares may not be in the best interests of
shareholders generally.

A further potential ethical threat is an intimidation threat by Rohit and Katy towards other directors
in attempting to put pressure on them to support the share repurchase decision and to purchase
shares under the scheme.

There may also be an intention of intimidation towards GRC to give advice favouring the repurchase.

It is helpful to apply the Institute of Business Ethics three tests:

1. Transparency
2. Effect
3. Fairness

Transparency - would Rohit and Katy mind people (other board members, other shareholders, GRC,
existing customers, suppliers, employees) knowing of the content of the conversation and their
apparent motivations and intentions regarding the share buy-back?

Effect- who would be hurt by Rohit and Katy's intended actions regarding the buy-back? Also, who
does non disclosure harm or hurt? eg, a sale is made at an artificially low price.

Fairness - would the implementation of the buy-back be considered fair by all those stakeholders
those affected?

eg, in consequences for those selling and the continuing shareholders.

GRC

Ethical issues for GRC relate to the actions of one of their managers, Hannah, in overhearing the
conversation and in recording the conversation. Both may be a breach of contidentiality, even
though the overhearing element may have been inadvertent.

The recording of the conversation is also a breach of confidentiality, is clearly deliberate and may be
illegal. Legal advice needs to be taken.

It is likely that if the action of Hannah in recording the conversation is illegal, then she would not
want transparency, but GRC Is likely to have a duty to disclose, although legal advice may be needed.
Actions in response to ethical issues

GRC's initial actions should be:

Disclose to the full board the content of the conversation between Rohit and Katy and that it had
been overheard and recorded.

Destroy/delete the recording permanently. Take legal advice.

Suggest that the company takes legal advice as to whether Rohit and Katy's actions would be illegal,
either being criminal or in breach of fiduciary duties

Consider ceasing to act for Ketch if the matter is not appropriately resolved by the board.

If continuing to act, make clear that the GRC report on the proposals will be an objective assessment
and will be unaffected by the self-interest of any particular stakeholder.
Ethics – Professional scepticism – Transparency, Effect, Fairness,
illegal transaction, honesty and integrity,
Ethics pertains to whether a particular behaviour is deemed acceptable in the context under
consideration.

N&N

In making any ethical evaluation it is first necessary for N&N to establish the facts and exercise
professional Scepticism. In this case, the evidence is only from Mike and he has made a number of
assertions which need to be established including:

The fact and seriousness of the fault.

That the software has been sold to the customer containing the fault (the time period could have
permitted the fault to be rectified).

The conversation was confidential which may mean 'not attributable' or 'not disclosable'. Either way,
there may be a duty to disclose for N&N if there is a possibility of illegal behaviour. Legal advice
should be taken.

MVS

Regarding the individual matters in the email.

If Mike is correct, there has been a breach by MVS of the key ethical principles of honesty and
integrity in knowingly selling a faulty product which could cause problems for the customer and
consumers at a later date.

This could amount to deception.

Other ethical issues include the following:

Transparency - would MVS mind people (existing customers, suppliers, employees) knowing that
software has been knowingly sold with a fault?

Moreover, the fault was made transparent to managers before the sale occurred, giving the
opportunity to correct it before delivery, even if after the agreed delivery date.

The ethical tests of openness and transparency do not therefore appear to have been met by MVS if
Mike is correct.

Effect -whom does the decision to sell knowingly sell software with a fault affect or hurt? There may
be substantial negative effects on customers and the end consumers who will own the customers'
cars.

However, if and when ultimately discovered, there are also likely to be significant effects on MVS's
reputation and therefore on MVS stakeholders, including the employees.

However, if the fault never causes a problem, as is possible according to Mike, then stakeholders will
be largely unaffected and there is no effect. This is a risk that MVS is passing to its customers and
other stakeholders.

Fairness - would the fact that software has been knowingly sold with a fault be considered fair by
those affected?
This seems very unlikely give the lack of transparency, dishonesty and potential consequences of the
fault.

Mike

Mike appears to have acted ethically in being transparent in reporting the tault. However, he may
have been more active in following up the implementation of the fault correction but, having
become aware he has reported it to N&N as a responsible third party.

Alternatively, he may have reported it within MVS, through any whistleblowing mechanism that
exists, but he may believe this would not be effective or may fear personal consequences.

Actions for N&N

As ICAEW Chartered Accountants, N&N are bound by the ICAEW ethical code. If there is a belief that
the transaction is illegal, N&N should obtain advice (eg ICAEW helpline or legal advice). In this case,
they should not speak to Mike or the MVS board as this may be tipping off.

lf advice is received that this is not an illegal transaction, but it may be unethical, then N&N should
raise the issue formally with the Mvs board and ask Sushil tor an explanation. The response should
be recorded.

As an ICAEW Chartered Accountant, Hannah should consider reporting the matter to the ethics
partner of N&N.

Although not the auditors of MVS, N&N should not continue to act for MVS if there has been an
illegal act.
Ethics Legality – Bribery, Transparency, Independence, Conflict of
interest,
Ethics pertains to whether a particular behaviour is deemed acceptable in the context under
consideration. In short, it is 'doing the right thing'.

In making any ethical evaluation, it is first necessary to establish the facts. In this case, it would seem
that the source of information is unclear, as is its validity. It is important to establish not just the
actions, but the motivations behind the actions.

The ethical risk is that the £1,800 of free samples' has been given by the FD to Pierre as an
inducement for Pierre to instruct that Flomm purchases C$4.5m of goods from CC each year.

If this is true, there are a range of ethical issues:

Legality- making an inducement could be illegal under the Bribery Act 2010. Legal advice should be
taken.

Conflict of interest- Pierre may be making a decision which is in his own best interests in obtaining
free samples or because of the friendship with the FD but is not in the best interests of his employer,
Flomm.

Transparency (for the FD)- the FD did not tell other members of the SSS board and so was not open.
Whilst the amount itself was small, it could have influenced a significant contract with Flomm. It
would also distort the free sample data for the FiTench project.

The reasons for the lack of transparency need to be established.

Transparency (for Pierre) - did Pierre inform his board? This is a central point. If the free samples
were known about by the Flomm board and they were being tested by Pierre for quality control
before signing a contract, then this may mitigate many ethical concerns. However, the scale of
f1,800 seems unwarranted and it is not clear why they were sent to his private residence, rather
than a business premises.

Independence - if Pierre is being influenced by private gifts or personal friendships he is not taking
an objective decision in determining the best suppliers for Flomm.

Actions

Alison should inform the board of the full facts surrounding her actions. Supporting evidence should
be provided where appropriate (eg if other Flomm board members were staying with Pierre at his
house to quality sample the goods).

Alison's responses should be recorded in the minutes.

If there is a belief that the transaction is illegal, the SSS board should obtain legal advice. In this case,
they should not speak to Alison as this may be tipping of.

As part of business trust and transparency, Alison should ensure that the CC board and Pierre are
aware of what has occurred.

If the goods were for Pierre then the value seems beyond any reasonable level of personal use.
Alison should try to establish what has happened to them as evidence of motivation (eg were they
sold on by Pierre).

Alison should disclose whether any further and more significant inducements have been made to
Pierre
Ethics - assurance engagement ISAE 3400 - intimidation, conflict of
interest and self-interest, independence, self interest
Assurance and non-assurance work

Perkins is being asked to carry out two elements in the engagement: () advisory work (i) assurance
work.

There are potential threats to our independence in the assurance engagement arising from the
advisory work. These are a self-interest threat and a self-review threat.

A self-interest threat may arise if the fees from the non-audit element of the lLA engagement is
substantial and likely to occur on a regular basis as this could lead to a perceived or actual loss of
independence/objectivity.

There is also a self-review threat in that the work advising on risks, the Japanese project and the
currency forward hedging may then be reviewed as part of the assurance report on the cash flow
forecasts.

Actions

Those charged with governance should be kept informed of the position regarding fees a Perkins'
independence particularly as ILA is a listed company.

Use different teams for assurance engagement and advisory work.

Seek input from Yokosata bank about whether it is happy for Perkins to perform the work in full
knowledge of other work being carried out.

Seek advice from the ethics partner.

Consider rejecting the assurance work if Perkins' ethics partner and those charged with governance
are not satisfied that the safeguards are sufficient.

Comments of chief executive

There is a possible intimidation threat by the CEO in exerting pressure on Perkins to provide a
favourable assurance opinion. The threat' is implied rather than direct. It does not seek directly to

Suggest adverse consequences or benefits Tor Perkins.

Rather, t is seeking to pressurise Perkins using the possible adverse social consequences to others
(eg iow income employees in India) which may arise from an unfavourable report.

To the extent that it is implied that ILA may fail ('serious financial distress ') there is an implied threat
that Perkins would not be able to benefit from future fees if ILA fails.

Objectivity is a key ethical principle that applies to assurance engagements as much as to statutory
audit.

The pressure in this case for a favourable assurance report is particularly inappropriate as theCEO
has admitted that the three-year forecasts are at the high end of the acceptable range' and
therefore have inbuilt bias.
The further assertion that the forecasts are within the acceptable range needs to be treated with
professional scepticism given the benefits, and therefore self-interest to ILA and the CEO, that could
arise from a favourable report.

Evidence from the assurance engagement needs to test the reasonableness of the assumptions and
forecasts.

The assurance report may be able to support an acceptable range of forecasts and comment on
where the management's estimates sit within that range.

Perkins may be able to highlight to Yokosata bank that the estimates are towards the top of an
acceptable range (it that is their opinion based on the evidence gathered).

The fact that Perkins has been asked to produce a favourable' report may lead to questioning
management integrity and whether we wish to act for this client.

It is not the purpose of the assurance report to provide: "support for the full ¥32,000 million loan". It
is to provide assurance over the reasonableness of the assumptions underlying the forecasts. It is for
the Yokosata Bank to determine the appropriate amount of the loan.

Only limited assurance can ever be provided for prospective financial information in accordance with
ISAE 3400. Reasonable assurance can never be given for forecast information.

Actions

The assurance engagement should only be accepted on the basis that an objective conclusion will be
given based on appropriate evidence gathered from the assurance procedures. This should be
transparent to all concerned prior to acceptance of the engagement.

An engagement letter should be agreed with those charged with governance, if it is decided to
continue with this engagement on reasonable ethical grounds. This should make clear the nature of
the assurance processes, the limitations of the procedures and the form of the conclusion.

It should be made clear that only limited assurance can be provided in the form of a negatively
expressed opinion in accordance with ISAE 3400.
Ethics – Faulty products, compensation and compensation, legal
advise, Transparency, self interest and impact, Fairness, honesty
Ethics pertains to whether a particular behaviour is deemed acceptable in the context under
consideration. In short, it is 'doing the right thing'.

In making any ethical evaluation, it is first necessary to establish the facts. In this case, it would seem
that some facts are reasonably clear in terms of a batch of components traced to supplier, Hemple,
being identified as faulty. The consequences of the fault may be less clear and still need to be
established.

In the case of identified faulty components, the ethical issues are transparency, honesty, fairness
and self-interest. For the components which have been discovered as faulty, it would appear that
Agroc is acting properly in recalling its products.

However, this leaves open other compensation and indirect costs to dealers (eg administration costs
of the return and loss of reputation). Agroc's legal obligations and rights relative to those of Hemple
need to be established.

In terms of unidentified faulty components, the ethical issues of transparency, honesty, fairness and
self interest arise.

Legal advice should be taken by Agroc as to its responsibilities and potential liabilities and those of
Hemple. Although the component comes from the supplier and the fault is attributable to that
supplier there may still be legal and ethical obligations for Agroc.

A particular problem is that the purchase contract, the sales contracts and the consequences cover
several legal jurisdictions where legal liability may vary.

The finance director appears to be prepared to behave ethically in relation to the unidentified
product, but this leaves open the question of whether the chief executive's position is unethical.

The original responsibility for the fault is further down the supply chain with the supplier, Hemple,
and perhaps to its suppliers if that were to be the source of the fault.

However, it needs to be established whether Agroc had appropriate quality assurance procedures in
place which could reasonably have detected the fault before it was installed in items of farm
equipment that it produced.

Transparency- a public recall of the identified equipment with appropriate compensation would be
transparent and in the public interest. The proportionate liability tor Agroc or the Hemple liquidators
to pay compensation needs to be established.

For unidentified components, keeping quiet about the faulty components that have already been
installed in equipment that has been distributed to dealers and perhaps on to their customers is not
consistent with the principle of transparency.

It is also possible that some products with faulty components are still in inventory to be sold to
customers in future with the known risk that they may be faulty.

A test of transparency is, would Agroc mind if people (customers, suppliers, shareholders,
regulators, employees) know that it has taken this action.
Lack of full disclosure may in fact not be an option as it may be imposed by disclosure by the
insolvency practitioner for Hemple.

Self interest and impact- a full recall may embarrass Agroc but could reduce harm to the dealers and
consumers. The effect of a disclosure about identified items only would be to keep information from
the dealers and consumers who have already bought the equipment and may suffer due to Agroc
acting in its self interest and not the public interest.

More serious, although perhaps less likely, is the fact that their health may be affected by injuries in
future.

Honesty-once there has been disclosure about identified items, public questioning of other
components may force disclosure or deceit.

Fairness- it is likely that dealers, competitors, and consumers would not consider as fair that Agroc
has knowingly deceived them and withheld potentially important information about its products.

Actions

Agroc

Agroc should be guided by legal advice to assess its legal obligations as a minimal ethical response.
Health and safety laws may be a key requirement in this respect, ranking above any contractual
commercial obligations.

Beyond legal obligations, the most appropriate ethical actions would be for Agroc to act honestly
and with integrity, making a full disclosure of all the facts, even if this were only to highlight a low
probability of future faults if evidence revealed this to be the case.

Even it the law does not require disclosure, Agroc should consider doing so, to avoid further damage
to its reputation it the facts were to be disclosed from alternative sources.

Agroc should have discussions with the insolvency practitioner of Hemple to establish how the fault
has arisen and why it was not detected.

Consider whether further information can be gathered on other faulty batches so they can be
identified. A joint disclosure could also be considered.

Agroc may have recourse against Hemple depending on the contractual terms but enforcing this may
be unworkable if there are limited assets available on insolvency.

Finance director

As an ICAEW Chartered Accountant and a director of Agroc, the FD has ethical and legal standards to
uphold independent of any obligations by the company.

Whilst the chief executive has given an opinion the issues, this matter needs to be considered by the
whole Agroc board based on legal advice. As a member of the Agroc board, the FD should ensure
this matter is discussed by the full board, including the chairman and non-executives.

If the FD believes any decision of the board may be illegal, then he should take legal advice and
where appropriate, inform the legal authorities in the relevant jurisdictions).
It the actions are deemed legal, but may be unethical, the FD should take advice from the ICAEW
helpline and consider the ethical implications of disclosure having regard to the ethical duty of
confidentiality.

Resigning should be considered if other avenues of ethical safeguards have not been possible, but
resignation does not necessarily absolve the FD from responsibility or liability.

More generally, the FD should encourage the board to review the company's overall culture and
actions to ensure that they are in line with maintaining ethical standards. This could include full
disclosure and appropriate compensation for affected customers.
Close personal relationship – need facts – Director not best interest of
company – reverse decision – intimidation – appointment of suppliers
EE winning contract
Ethics pertains to whether a particular behaviour is deemed acceptable in the context under
consideration. In short, it is 'doing the right thing'.

In making any ethical evaluation, it is first necessary to establish the facts. In this case, it would seem
that some facts are reasonably clear in terms of John’s disapproval of the evaluation committee’s
decision to exclude Toller from the shortlisting. His motivations in having this view are less clear and
it is therefore necessary to establish these facts and apply professional scepticism about his
motivations.

A key issue is whether John is motivated from self-interest, for example due to a close personal or
business relationship with the Toller CEO. If acting in his own self interest, then the ethical principle
of independence is threatened. Also, to the extent that the tender decision is not objective, then
there may be bias in deciding between tenderers, resulting in a lack of fairness.

Moreover, there may be legal issues if John is not carrying out the fiduciary duty of directors in
acting in the best interests of the company. There may also be illegal aspects to the conduct of the
tender bid which could amount to fraudulent behaviour. Legal advice should be taken.

It cannot however be assumed with certainty that John is acting in his own self interests. He may
genuinely believe that Toller is the best company to deliver the tender. However, a reasonable and
informed third party may not perceive John to be acting objectively given his relationship with the
Toller CEO.

Aside from John’s motivations, ethical issues arise from John’s conduct in influencing the tender
decision.

It seems inappropriate that John has entered into private discussions with the Toller CEO. Depending
on what was discussed, it may be viewed as unfair if the Toller CEO obtains privileged information
regarding the tender. This may be seen as a breach of confidentiality which is needed in a tender to
obtain fairness.

Also, John’s actions in attempting to reverse the original shortlisting decision by the evaluation
committee may be seen as inappropriate. There is a possible intimidation threat by John in exerting
pressure, as CEO, on the members of the evaluation committee to reverse their original decision to
obtain the decision he wants. The ‘threat’ is implied rather than direct. It does not seek directly to
suggest adverse consequences for members of the evaluation committee. Rather, it is seeking to
pressurise them by suggesting poor judgement and that he may ‘work around’ them by appointing
new members, including himself, to obtain a majority on the evaluation committee.

Also, John’s actions in attempting to revise the membership of the evaluation committee may be
seen as intimidation of the board and not exercising good governance.

The appointment of Nancy might not be appropriate as she has worked for Toller and there is
therefore a risk of a familiarity threat and lack of independence. The fact that John suggested her
may cast doubt over her objectivity.

Actions
Marcus is not a member of the board, but it is important that the board is aware of the issues and
the actions of John.

Tom Shilling, the IT director, who voted against John’s wishes is a member of the board so he could
raise the relevant matters, but Marcus needs to be confident that he will do so appropriately if this is
the only action he intends to take.

Marcus could inform the non-executive Chair (or the audit committee) about the circumstances. A
whistleblowing policy should exist in this context.

It would be appropriate to ask for full disclosure and transparency by John of any self interest in
appointing Toller. The nature of John’s conversations with the Toller CEO should be disclosed to the
board.

If Marcus is not happy that Tom and the Chair have dealt with this matter appropriately then he
should consider taking legal advice on whether John’s conduct has been illegal.

The board should investigate whether there has been any breach of corporate governance rules or
agreements.
Litigation – sued + not disclosing + preform non audit work/safeguard
+ CEO integrity – lifestyle and intimidation
Litigation

A key ethical issue is that SAC may be sued by Fuller (and indeed by Zed if the error was SAC's and
Zed suffers a loss to Fuller). Bill would not be aware of this as it is not disclosed and there is no
traceable correspondence to be identified by due diligence. The ethical principles are transparency
and honesty.

Under Proposal 2 the issue is of less concern as Bill gets a fixed cash price if these terms are agreed.

Under Proposal 1 however the litigation could affect the relative values of the businesses and
therefore the merger terms.

Otherwise Bill may suffer a loss due to deliberate non-disclosure. Our duty in due diligence would
however be to review WAA not SAC. Nevertheless:

 we may become auditors of SAC and could then require disclosure at least as a contingent
liability in the financial statements;
 if SAC demonstrates dishonesty we should question whether we want them as a client.

Non-audit work

In general, Section 5 of the FRC Ethical Standard does permit other work to be carried out for audit
clients but the ethical issue is one of self-review threat.

Appropriate safeguards need to be established, although there may be instances where there are no
appropriate safeguards and thus other work would be inappropriate.

As potential auditors of SAC we should question whether advisory work on valuations is consistent
with a possible future role as auditors.

Due diligence work is on another business and hence is likely to be less subject to a self-review
threat. Acceptance of the valuation and advisory work, but not the audit, would be one possible
safeguard.

The issue of accepting audit and non-audit work becomes even more significant given SAC's
intention to become a listed company in 20Y0. As a listed company, SAC will be a public interest
entity (PIE) meaning it is subject to restrictions which severely restrict the amount of non-audit
services that an auditor can provide for a client.

Bill's integrity

Bill's forceful personality and flamboyant lifestyle might raise some question marks over his integrity
and/or professional behaviour. This is an assurance risk in any due diligence but neither Bill nor WAA
is our client and hence there is no immediate ethical issue, unless for instance we discover evidence
of money laundering where we need to disclose directly to the NCA, rather than to our client.

If, however, the merger takes place and Bill becomes a director of SAC under Proposal 1, then any
continued involvement with SAC may need to be questioned. However, just because Bill has a
forceful personality and flamboyant lifestyle does not necessarily mean his behaviour is unethical or
unprofessional.