Answers

Answer 1
ABC Group Statement of cash flows for the year ended 31 ecember !"1! Cash flows from operating activities $000 Net loss before tax Adjustments for: Depreciation 5,800 mpairment losses !" "#0

$000 16,500

ncrease in trade recei$ables %&,800 ' (,500 ' 600) ncrease in in$entories %16,000 ' 10,000 ' 1,600) ncrease in trade pa*ables %(,600 ' 6,100 ' +00) Cash generated from operations ncome taxes paid Net cash inflows from operating activities Cash flows from investing activities Ac,uisition of subsidiar* net of cas- ac,uired .urc-ase of propert*, plant and e,uipment Net cash used in investing activities Cash flows from financing activities .roceeds from issue of s-are capital /1",+00 0 5,800 ' 10,000 ' ",000 ' %5,000 ' 1,000)1 Di$idend paid Di$idend paid to N2 Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

!+

6,0#0 "",5#0 %1,(00) %#,#00) 1,"00 1(,6#0 %#,"00) 1+,##0 %600) %1+,100) %1+,(00)

!1

!#

",100 %&00) %#0) 1,160 &00 1,500 ",#00

#or$ings%
#1 .ropert*, plant and e,uipment $000 "5,000 Depreciation 500 ",(00 1+,100 3al4 c5d #1,+00 $000 5,800

3al4 b5d 6e$aluation surplus 7n ac,uisition Additions %bal4 fi84)

+5,500 #1,+00

1&"

Answers

#! :oodwill $m ' mpairment loss 1,6#0 3al4 c5d 1,6#0 $m "#0 1,#00 1,6#0

3al4 b5d 7n ac,uisition /5,000 0 %#,800 x +09) ' #,8001

#3 ncome taxes paid $m 3al4 b5d #,"00 Ac,uistion 5,"00 .5; &,#00 $m #,000 "00 5,"00 &,#00

ncome taxes paid %bal4 fi84) 3al4 c5d

#& Non'controllin8 interest $m 3al4 b5d #0 Ac,uisition %#,600 x +09) 1,(50 <2 1,(&0 $m ' 1,##0 +50 1,(&0

Di$idend paid 3al4 c5d

1&+

Answers

Answer !
(ocatt Group Statement of cash flows for the year ended 3" November !"1! $m Cash flows from operating activities .rofit before taxation Adjustments for: Depreciation %$i) mpairment of 8oodwill Amortisation .rofit on exc-an8e on land %15 0 # ' 10) :ain on in$estment propert* ;oss on replacement of in$estment propert* :ain on re$aluation of in$estment in e,uit* instruments %<i8ret ' fair $alue on dereco8nition less fair $alue at 1 December "01": 5 ' #) 6etirement benefit expense %10 ' 8 0 ") 2as- paid to defined benefit plan =-are of profit of associate nterest expense paid $m 5&400 "(400 +1450 1(400 %&400) %1450) 0450

!1 !" !#

!+ !+

%1400) #400 %(400) %6400) 6400 61450 1"0450 "+400 56400 8&400 "88450 %6400) %16450) "66400 %8400) %#8400) %&8400) %1400) %1"400) %5400) 15400 %15(400) ' %#400) "400 %5400) %1+400) %"0400) 8&400 1#+400 "+"400
1&#

'perating profit before wor$ing capital changes Decrease in in$entories %1"8 ' 105) Decrease in trade recei$ables %11+ 0 5 ' 6") ncrease in trade pa*ables %1## ' 55) Cash generated from operations nterest paid ncome taxes paid !( Net cash from operating activities Cash flows from investing activities Ac,uisition of subsidiar* %15 ' () Ac,uisition of associate !6 .ropert*, plant and e,uipment !5 .urc-ase of in$estment propert* %per ,uestion) !1 .urc-ase of intan8ible assets %8 0 #) !" .urc-ase of in$estments in e,uit* in$estments !8 .roceeds from sale of land Net cash used in investing activities Cash flows from financing activities .roceeds from issue of s-are capital %"&0 ' "(5 ' 15) 6epa*ment of lon8'term borrowin8s %6( ' (1) 6i8-ts issue to N2 !& > =72 ? Di$idends paid %=72 ?) Di$idends paid to N2 %=72 ?) Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year

Answers

#or$ings%

1&5

Answers

#1 Goodwill ) *igret 2onsideration %15m 0 15m) @A of N2 @A of pre$iousl* -eld e,uit* interest ;ess: dentifiable net assets %15 0 18 0 5 0 () Deferred tax %#5m ' #0m) x +09 :oodwill :oodwill $m 3al4 b5d Ac,4 of <i8ret 68400 mpairment loss %bal4 fi84) 11450 bal4 c5d (&450

$m

$m +0400 "0400 5400 55400

#5400 %1450) %#+450) 11450

$m +1450 #8400 (&450

#! +ntangible assets ntan8ible assets $m ("400 Amortisation %bal4 fi84) 18400 8400 #400 3al4 c5d 10"400 $m 1(400

3al4 b5d Ac,4 of sub4 .roject %cas- paid) De$elopment %cas- paid)

85400 10"400

#3 Define benefit liabilit* $m 8400 3al4 c5d (400 2urrent ser$ice cost .ast ser$ice cost 6emeasurement loss "5400 %72 , per ,uestion) #0400 $m ""400 10400 "400 6400 #0400

nterest on plan assets 2ontribution paid %bal4 fi84)

3al4 c5d

#& n$estment propert* $m 6400 Disposal 1400 1450 3al4 c5d 8450 $m 0450 8400 8450

3al4 b5d New s*stem :ain %bal4 fi84)

1&6

Answers

#, .ropert*, plant and e,uipment $m "5#400 ;oss on re$aluation %72 ) 15400 ;and exc-an8ed %N3A) #400 Depreciation &8400 3al4 c5d +(1400 $m (400 10400 "(400 +"(400 +(1400

3al4 b5d Ac,4 of sub4 New plant exc-an8e Additions %bal4 fi84)

#n$esment in associate $m ' Di$idend recei$ed 6400 #8400 3al4 c5d 5#400 $m ' 5#400 5#400

3al4 b5d .rofit or loss Ac,uisition %bal4 fi84)

#. <ax pa*able <ax paid %bal4 fi84) $m 16450 bal4 b5d %current) 3al4 b5d %deferred) .rofit or loss +5400 72 %on in$4 in e,uit* inst4) %$iii) ++400 Ac,uisition %!1) 8#450 $m +0400 #1400 11400 1400 1450 8#450

3al4 c5d %current) 3al4 c5d %deferred)

#/ n$estment in e,uit* instruments $m &0400 Dereco8nition of in$estment in +400 <i8ret %now sub4) 1400 5400 3al c5d &&400 $m 5400

3al4 b5d 72 %" 0 1 %$iii)) 6e$aluation 8ain on in$estment in <i8ret Additions %bal4 fi84)

&#400 &&400

#0 Non'controllin8 interest $m 1+400 3al4 b5d 55400 <otal compre-ensi$e income @A of N2 on ac,4 6i8-ts issue %note) 68400 $m +6400 10400 "0400 "400 68400
1&(

Di$idends paid %=72 ?) 3al4 c5d

Answers

1b21i2 3se of the indirect method of preparing statements of cash flow <-e $ast majorit* of companies use t-e indirect met-od for t-e preparation of statements of cas- flow4 Bost companies justif* t-is on t-e 8rounds t-at t-e direct met-od is too costl*4 <-e direct met-od presents separate cate8ories of cas- inflows and outflows w-ereas t-e indirect met-od is essentiall* a reconciliation of t-e net income reported in t-e statement of financial position wit- t-e cas- flow from operations4 <-e adjustments include non'cas- items in t-e statement of compre-ensi$e income plus operatin8 cas- flows t-at were not included in profit or loss4 <-e direct met-od s-ows net cas- from operations made up from indi$idual operatin8 cas- flows4 Csers often prefer t-e direct met-od because it s-ows t-e major cate8ories of cas- flows4 <-e complicated adjustments re,uired b* t-e indirect met-od are difficult to understand and pro$ide entities wit- more leewa* for manipulation of cas- flows4 <-e adjustments made to reconcile net profit before tax to cas- from operations are confusin8 to users4 n man* cases t-ese cannot be reconciled to obser$ed c-an8es in t-e statement of financial position4 <-us users will onl* be able to understand t-e siDe of t-e difference between net profit before tax and cas- from operations4 <-e direct met-od allows for reportin8 operatin8 casflows b* understandable cate8ories as t-e* can see t-e amount of cas- collected from customers, caspaid to suppliers, cas- paid to emplo*ees and cas- paid for ot-er operatin8 expenses4 Csers can 8ain a better understandin8 of t-e major trends in cas- flows and can compare t-ese cas- flows wit- t-ose of t-e entit*Es competitors4 An issue for users is t-e abuse of t-e classifications of specific cas- flows4 Bisclassification can occur amon8st t-e sections of t-e statement4 2as- outflows t-at s-ould -a$e been reported in t-e operatin8 section ma* be classified as in$estin8 cas- outflows wit- t-e result t-at companies en-ance operatin8 cas- flows4 <-e complexit* of t-e adjustments to net profit before tax can lead to manipulation of casflow reportin84 nformation about cas- flows s-ould -elp users to understand t-e operations of t-e entit*, e$aluate its financin8 acti$ities, assess its li,uidit* or sol$enc* or interpret earnin8s information4 A problem for users is t-e fact t-at entities can c-oose t-e met-od used and t-ere is not enou8- 8uidance on t-e classification of cas- flows in t-e operatin8, in$estin8 and financin8 sections of t-e indirect met-od used in FGA= (4 1b21ii2 <-e directors wis- to manipulate t-e statement of cas- flows in order to en-ance t-eir income4 As stated abo$e, t-e indirect met-od lends itself more easil* to t-e manipulation of cas- flows because of t-e complexit* of t-e adjustments to net profit before tax and t-e directors are tr*in8 to maHe use of t-e lacH of accountin8 Hnowled8e of man* users of accounts w-o are not sop-isticated in t-eir Hnowled8e of cas- flow accountin84 2orporate reportin8 in$ol$es t-e de$elopment and disclosure of information, w-ic- t-e entit* Hnows is
1&8

Answers

8oin8 to be used4 <-e information -as to be trut-ful and neutral4 <-e nature of t-e responsibilit* of t-e directors re,uires a -i8- le$el of et-ical be-a$iour4 =-are-olders, potential s-are-olders, and ot-er users of t-e financial statements rel* -ea$il* on t-e financial statements of a compan* as t-e* can use t-is information to maHe an informed decision about in$estment4 <-e* rel* on t-e directors to present a true and fair $iew of t-e compan*4 Cnet-ical be-a$iour is difficult to control or define4 <-e directors must consider -ow to best appl* accountin8 standards e$en w-en faced wit- issues t-at could cause t-em to lose income4 <-e directors s-ould not pursue self'interest or fail to maintain objecti$it* and independence, and must act wit- appropriate professional jud8ement4 <-erefore t-e proceeds of t-e loan s-ould be reported as cas- flows from financial acti$ities4

1&&

Answers

Answer 3 1a2

4ambe5e Group Statement of cash flows for the year ended 3" (une !""Cash flows from operating activities .rofit before tax Adjustments for: nterest expense =-are of profit of associate Depreciation mpairment of 8oodwill !" 6etirement benefit expense %non'cas- item)

$m

$m 680

#0 %"0) 60 8 1+ 101 (81 "0 %80) 1#1 86" %() %+1) %1&0) 6+# %"51) %100) +5 %#00) %(16) +0 66 %#6) %58) %8) %&0) 1#0 50

Decrease in in$entories %680 ' 580 ' &0) ncrease in recei$ables %610 ' 5+0) ncrease in trade pa*ables %1,+#1 ' 1,"00) Cash generated from operations 6etirement benefit contributions nterest paid ncome taxes paid Net cash inflows from operating activities Cash flows from investing activities .urc-ases of ..? .urc-ase of subsidiar* Di$idend recei$ed from associate n$estment in 6i$er Net cash used in investing activities Cash flows from financing activities .roceeds from issue of s-are capital ncrease in loans %6"1 ' 555) Di$idend paid Di$idend paid to N2 Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

!6 !(

!1 !#

!8 !5

"00

Answers

1b2 <-e re,uirement to consolidate an in$estment is determined b* control, not merel* b* owners-ip4 n most cases, t-is will in$ol$e t-e parent compan* ownin8 a majorit* of t-e ordinar* s-ares in t-e subsidiar* %to w-ic- normal $otin8 ri8-ts are attac-ed)4 <-ere are circumstances, -owe$er, w-en t-e parent ma* own onl* a minorit* of t-e $otin8 power in t-e subsidiar*, but t-e parent still -as control4 FG@6= 10 2onsolidated @inancial =tatements, issued in Ba* "011, retains control from its predecessor FGA= "( as t-e He* concept underl*in8 t-e parent5subsidiar* relations-ip but it -as broadened t-e definition and clarified its application4 FG@6= 10 states t-at an in$estor controls an in$estee if and onl* if it -as all of t-e followin84 14 "4 +4 6ower o$er t-e in$estee 78posure9 or rights9 to variable returns from its in$estment wit- t-e in$estee, and <-e ability to use its power o$er t-e in$estee to affect t-e amount of t-e in$estorEs returns4

6ower is defined as e8isting rights that give the current ability to direct the relevant activities of the investee4 <-ere is no re,uirement for t-at power to -a$e been exercised4 6ele$ant acti$ities ma* include: =ellin8 and purc-asin8 8oods or ser$ices Bana8in8 financial assets =electin8, ac,uirin8 and disposin8 of assets 6esearc-in8 and de$elopin8 new products and processes Determinin8 a fundin8 structure or obtainin8 fundin8

n some cases assessin8 power is strai8-tforward, for example, w-ere power is obtained directl* and solel* from -a$in8 t-e majorit* of $otin8 ri8-ts or potential $otin8 ri8-ts, and as a result t-e abilit* to direct rele$ant acti$ities4 n ot-er cases,, assessment is more complex and more t-an one factor must be considered4 FG@6= 10 8i$es t-e followin8 examples of ri8-ts, ot-er t-an $otin8 or potential $otin8 ri8-ts, w-ic- indi$iduall*, or alone, can 8i$e an in$estor power4 14 "4 +4 #4 6i8-ts to appoint, reassi8n or remo$e He* mana8ement personnel w-o can direct t-e rele$ant acti$ities4 6i8-ts to appoint or remo$e anot-er entit* t-at directs t-e rele$ant acti$ities4 6i8-ts to direct t-e in$estee to enter into, or $eto c-an8es to transactions for t-e benefit of t-e in$estor 7t-er ri8-ts, suc- as t-ose specified in a mana8ement contract4
"01

Answers

Applying the above criteria to 4ambe5e:s relationship with ;iver% IambeDe -as power to 8o$ern t-e financial and operatin8 policies of 6i$er, t-rou8- its operatin8 8uidelines4 t also -as t-e power to pro-ibit t-e in$estment mana8er from profitin8 personall* from t-e in$estments4 IambeDe is exposed to and -as ri8-ts to $ariable returns from its in$estment in 6i$er, as it recei$es &59 of t-e profits and 1009 of t-e losses of 6i$er4 IambeDe t-erefore controls 6i$er, and 6i$er s-ould be consolidated4 1c2 7thical behavior in t-e preparation of financial statements, and in ot-er areas, is of paramount importance4 <-is applies e,uall* to preparers of accounts, to auditors and to accountants 8i$in8 ad$ice to directors4 Accountants act unet-icall* if t-e* use Jcreati$eE accountin8 in accounts preparation to maHe t-e fi8ures looH better, and t-e* act unet-icall* if, in t-e role of ad$iser, t-e* fail to point t-is out4 <-e creation of 6i$er is a device to $eep activities off 4ambe5e:s statement of financial position 4 n -idin8 t-e true nature of IambeDeEs transactions wit- 6i$er, t-e directors are acting unethically4 Showing the payment of <&"" to river as a dividend is deliberately misleading , and ma*, depending on the laws that apply9 be illegal4

"0"

Answers

Answer & 1a2

#arrburt Group Statement of cash flows for the year ended 3" November !""/ Cash flows from operating activities $m Net loss before tax Adjustments for: nterest expense & =-are of profit of associate %6) Depreciation !1 +6 .rofit on disposal of propert*, plant and e,uipment %6+ ' 56) %() .rofit on insurance claim %+ ' 1) %") @orei8n exc-an8e loss %141 0 048+) !" " mpairement losses %"0 0 1") +" :ain on re$aluation of in$estment in e,uit* instruments !6 %() 6etirement benefit expense %non'cas- item) %ii) 10

$m %#()

Decrease in in$entories %1&8 ' 1+5) Decrease in recei$ables %16+ ' &") Decrease in trade pa*ables %115 ' 180 ' "048+ %!")) Cash generated from operations 6etirement benefit contributions nterest paid ncome taxes paid Net cash inflows from operating activities Cash flows from investing activities .urc-ases of ..? /56 %!1) 0 141 %!")1 .roceeds from sale of ..? .roceeds from sale of in$estments in e,uit* instruments Ac,uisition of associate Di$idend recei$ed from associate Net cash used in investing activities Cash flows from financing activities .roceeds from issue of s-are capital %650 ' 5&5) 6epa*ment of lon8'term borrowin8s %"0 ' 6#) Di$idend paid %statement of c-an8es in e,uit*) Di$idend paid to N2 Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

%ii) !( !8

6( "0 6+ (1 %86) 68 %10) %8) %+&) 11 %5() 6+ #5 %&6) " %#+) 55 %##) %&) %5) %+) %+5) +"+ "88

%iii) %i) !5 !5

!&

"0+

Answers

#or$ings%
#1 .ropert*, plant and e,uipment $m 3al4 b5d +60 Disposals :ains on propert* re$aluation # Depreciation 6eplacement asset from insurnace co4 + Asset destro*ed Additions %forei8n) ' credit %10055) %iii) "0 3al4 c5d Additions %forei8n) ' cas- %"8055) %iii) 56 ##+ #! 78change loss At +0 Kune "008 ..? %+8055) .a*ables %<o record purc-ase of ..?) At +1 7ctober "008 .a*ables %"8055) .rofit or loss ' loss 2as- %"805#4&) %3ein8 pa*ment of "80m dinars) At +0 No$ember "008 .rofit or loss ' loss .a*ables %1005#48 ' 10055) %3ein8 loss on re'translation of pa*able at t-e *ear end4) $m 56 +6 1 +50 ##+

r= 1<m2 Cr= 1<m2 (6 (6

56 141 5(41

048+ 048+

Note: 14 <-e $"048+m was wron8l* included in trade pa*ables, so must be remo$ed from t-e decrease in trade pa*ables4 "4 <-e unrealised loss on retranslation of t-e pa*able %$048+m) must alwa*s be adjusted4 <-e realised loss on t-e cas- pa*ment of $141m would not normall* be adjusted, but it relates to a non'operatin8 items, so is transferred to purc-ase of ..?L #3 :oodwill $m 100 mpairment loss 3al4 c5d 100 $m "0 80 100

3al4 b5d

%$)

#& 7t-er intan8ible assets $m "#0 mpairment loss 3al4 c5d "#0 $m 1" ""8 "#0

3al4 b5d

%$)

"0#

Answers

#, n$estment in associate $m ' Di$idend recei$ed %8 x "59) %$i) 6 3al4 c5d &6 10" $m " 100 10"

3al4 b5d =-are of profit of associate .urc-ase of associate %bal4 fi84)

%$i)

#n$estment in e,uit* instruments $m 3al4 b5d 150 Disposal at fair $alue @air $alue 8ain on in$estment in Alburt %i) ( 72 %i) +0 3al4 c5d 18( #. =-ort'term pro$isions $m 8 3al4 b5d 5 .rofit or loss 1+ $m # & 1+ $m #5 1#" 18(

%i)

nterest paid %bal4 fi84) 3al4 c5d

#/ ncome taxes paid $m +& 3al4 b5d %current) 3al4 b5d %deferred) .rofit or loss +5 72 ' ? "8 72 ' ..? 10" $m #" "6 "& + " 10"

ncome taxes paid %bal4 fi84)

3al4 c5d %current) 3al4 c5d %deferred)

%i) %ii)

#0 Non'controllin8 interests $m 5 3al4 b5d " #6 5+ $m 5+

Di$idend paid %bal4 fi84) <otal compre-ensi$e income ' loss 3al4 c5d

5+

1b2 @inancial statement ratios can pro$ide useful measures of li,uidit* but an anal*sis of t-e information in t-e cas- flow statement, particularl* cas- flow 8enerated from operations, can pro$ide specific insi8-ts into t-e li,uidit* of !arrburt4 t is important to looH at t-e 8eneration of cas- and its efficient usa8e4 An entit* must 8enerate cas- from tradin8 acti$it* in order to a$oid t-e constant raisin8 of funds from non'tradin8 sources4 <-e J,ualit* of t-e profitsE is a measure of an entit*Es abilit* to do
"05

Answers

t-is4 Alt-ou8- !arrburt -as made a loss before tax of $"+m, net cas- from operatin8 acti$ities is a modest but -ealt-* $11m4 3efore worHin8 capital c-an8es, t-e cas- 8enerated is $"0m4 <-e ,uestion arises, -owe$er, as to whether this cash generation can continue if profitability does not improve 4 7f some concern is t-e fact t-at a lar8e amount of cas- -as been 8enerated b* t-e sale of in$estments in e,uit* instruments4 <-is source of cas- 8eneration is not sustainable in t-e lon8 term4 'perating cash flow does not compare favourably with liabilities %$115m)4 n t-e lon8 term, operatin8 cas- flow s-ould finance t-e repa*ment of lon8'term debt, but in t-e case of !arrburt, worHin8 capital is bein8 used to for in$estin8 acti$ities, specificall* t-e purc-ase of an associate and of propert*, plant and e,uipment4 t remains to be seen w-et-er t-ese in$estments 8enerate future profits t-at will sustain and increase t-e operatin8 cas- flow4 <-e compan*Es current ratio %5155155 M +4+) and acid test ratio %+805155 M "4#5) are soundN it appears that cash is tied up in long)term9 rather than short)term investment 4 An encoura8in8 si8n, -owe$er, is t-at t-e cash used to repay long)term loans -as been nearl* replaced by cash raised from the issue of share capital4 <-is means t-at gearing will reduce, w-ic- is particularly important in t-e li8-t of possible problems sustaining profitability and cash flows from trading activities4 1c2 2ompanies can 8i$e t-e impression t-at t-e* are 8eneratin8 more cas- t-an t-e* are, b* manipulatin8 cas- flow4 <-e wa* in w-ic- ac,uisitions, loans and, as in t-is case, t-e sale of assets, is s-own in t-e statement of cas- flows, can c-an8e t-e nature of operatin8 cas- flow and -ence t-e impression 8i$en b* t-e financial statements4 <-e classification of cas- flows can 8i$e useful information to users and operatin8 cas- flow is a He* fi8ure4 <-e role of et-ics in t-e trainin8 and professional li$es of accountants is extremel* important4 Decision'maHers expect t-e financial statements to be true and fair and fairl* represent t-e underl*in8 transactions4 <-ere is a fine line between deliberate misrepresentation and acceptable presentation of information4 .ressures on mana8ement can result in t-e misrepresentation of information4 @inancial statements must compl* wit- Fon8 Gon8 @inancial 6eportin8 =tandards %FG@6=), t-e @rameworH and local le8islation4 <ransparenc*, and full and accurate disclosure is important if t-e financial statements are not to be misleadin84 Accountants must possess a -i8- de8ree of professional inte8rit* and t-e professionEs reputation depends upon it4 ?t-ics describe a set of moral principles taHen as a reference point4 <-ese principles are outside t-e tec-nical and practical application of accountin8 and re,uire jud8ement in t-eir application4 .rofessional accountanc* bodies set out et-ical 8uidelines wit-in w-ic- t-eir members operate co$erin8 standards of be-a$iour, and acceptable practice4 <-ese
"06

Answers

re8ulations are supported b* a number of codes, for example, on corporate 8o$ernance w-ic- assist accountants in maHin8 et-ical decisions4 <-e accountant in !arrburt -as a responsibilit* not to masH t-e true nature of t-e statement of cas- flow4 =-owin8 t-e sale of assets as an operatin8 cas- flow would be misleadin8 if t-e nature of t-e transaction was masHed4 Csers of financial statements would not expect its inclusion in t-is -eadin8 and could be misled4 <-e potential misrepresentation is unacceptable4 <-e accountant s-ould tr* and persuade t-e directors to follow acceptable accountin8 principles and compl* wit- accountin8 standards4 <-ere are implications for t-e trut- and fairness of t-e financial statements and t-e accountant s-ould consider -is position if t-e directors insist on t-e adjustments b* pointin8 t-e inaccuracies out to t-e auditors4

"0(