Leonard could refer to the ETHICS PLUS ethical decision making model in solving his ethical dilemma at work. The following factors should be taken into consideration when identifying viable alternatives and choosing the best course of action:

1. Any violation to his professional, industry specific, or company code of conduct?

2. Is it against the Law?

3. Does it correspond with his self-values such as responsibility, fairness and honesty?

4. Can he disclose his decision to others openly and honestly without misgivings?

As far as professional conduct is concerned, Leonard should observe the fundamental principles of integrity, professional competence and professional behavior and comply with the Code of Ethics for Professional Accountants (HKICPA Code) when carrying out his duties as the accounting manager.  As the company policy stated very clearly that padding travel expenses was strictly prohibited, he should perform a guardian role and report any non-compliance to the management. He shall discuss with his immediate superior or a higher authority in the company, take appropriate steps to rectify or mitigate the consequences of the non-compliance, and decide whether it should be disclosed to the external auditor.

Moreover, it is an offence under Section 9(3) of the Prevention of Bribery Ordinance (POBO) for any employee to use false documents / receipts / account records with an intention to deceive the employer.  Customary behavior or ignorance of law is no defence. Department heads might have committed the above offence for using false expense vouchers and invoices to deceive the company. They might also have committed a criminal offence of deception contrary to Section 17 of the Theft Ordinance.

Professional accountants have a guardian role in safeguarding the governance of the company and protect the interests of different stakeholders. They should take remedial actions to help the company foster an ethical culture and enforce any related policies.

Financial Projection for Listing

Surely Patrick should handle the financial estimates and anticipated sales growth meticulously.  He should document his bases of assumptions and agree those with the Managing Director.  All these would be reviewed by the merchant bank which sponsored the listing as well as the reporting accountant, and the eventual delivery of the forecasts would be a matter of public and regulatory scrutiny once the company got listed.  Although the Managing Director did not bother which accounting method to use, Patrick should ensure that the accounting method followed all applicable Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and interpretations issued by the Hong Kong Institute of Certified Public Accountants.

Managing Director's Request for Manipulation of Management Accounting Data

Patrick should explain to the Managing Director that, first of all, a wilful act of manipulation of accounting data is a criminal offence.  Secondly, accounting information presented to banks would most likely be audited.  Once the banks realised that there were significant discrepancies between management accounting data previously presented and the audited accounting data, they would ask for explanations which would well call into question the credibility of the company.  In the worst case, banks could withdraw financial support to the company.

Request for a Cheque by the Assistant to General Manager

It would be a breach of the Section 9(3) of the Prevention of Bribery Ordinance (POBO) if the General Manger used false document e.g. false reimbursement records, to deceive his company. Furthermore, if the cheque payment was offered by the General Manager to the Mr Wong as an advantage in disguise to induce or reward for latter’s assistance in granting credit facilities to the company, both the General Manager and Mr Wong would breach Section 9 of the POBO.

Patrick should report the matter to the Managing Director and explain the legal consequences of being involved in such an act.  Patrick should take the opportunity to urge the Managing Director to issue a set of code of conduct to strengthen internal control of the company. He should report to the ICAC if corruption was suspected.

Offering of ‘Valuable Information'

The valuable information provided by Benny is likely to be insider information which, if used to deal in listed securities, could have severe legal consequences.  Patrick should make it clear to Benny that his evaluation of the banks was done in an objective manner and there would be no need for Benny to reciprocate with any 'gift' as a result of OPQ bank being appointed.  If Patrick's dinner with Benny is no more than a social entertainment, Patrick does not need to avoid it.  If by accident Patrick had heard of the valuable information from Benny but he did not deal, counsel nor procure other persons to deal in the securities, he would not breach the insider dealing provisions under the Securities and Futures Ordinance.