You are an employee working in the accounts office of Ukweli company listed on the Nairobi stock Exchange, and while working late one evening during the week, you realized that you had left your expensive pen in the boardroom at an earlier meeting and, given its value, you went upstairs to look for it. As you approached the door you heard the following discussion which was between the company C.E.O (Chief Executive Office and Brian (a Non -Executive director). “C. E.O: I am deeply concerned that if this fall in profit figures is disclosed in the next annual report, there will be all sorts of problems with the shareholders. We may even lose a number of big investors. Brian (also the cousin of the Chief Executive): (large sigh) Well, I suppose we could always find a way of making them look better. C.E.O: How? I can't see it at all. Brian: Well, we could make them just slightly higher than last year's figures by including the proceeds of the sales of our toothbrush division. C.E O: But the sale doesn't go through until October. Brian: No, but it will … and it doesn't make much difference, we need the money on the books now. C.E.O: But when the accounts are signed off, won't that be fraudulent? Brian: Not really … I don't see why … it's just a manipulation of timing rather than numbers. C. E.O: OK. That sounds good to me. Let’s sort it out now.” You heard one of them move towards the door, and you quickly slipped back to the stairs. You left work and spent the evening worrying about what you should do, if anything. Explain the corporate governance issues of concern in the above communication between the CEO and the Brian the non -executive board director
You are an employee working in the accounts office of Ukweli company listed on the Nairobi stock Exchange, and while working late one evening during the week, you realized that you had left your expensive pen in the boardroom at an earlier meeting and, given its value, you went upstairs to look for it. As you approached the door you heard the following discussion which was between the company C.E.O (Chief Executive Office and Brian (a Non -Executive director).
“C. E.O: I am deeply concerned that if this fall in profit figures is disclosed in the next annual report, there will be all sorts of problems with the shareholders. We may even lose a number of big investors.
Brian (also the cousin of the Chief Executive): (large sigh) Well, I suppose we could always find a way of making them look better.
C.E.O: How? I can't see it at all.
Brian: Well, we could make them just slightly higher than last year's figures by including the proceeds of the sales of our toothbrush division.
C.E O: But the sale doesn't go through until October.
Brian: No, but it will … and it doesn't make much difference, we need the money on the books now.
C.E.O: But when the accounts are signed off, won't that be fraudulent?
Brian: Not really … I don't see why … it's just a manipulation of timing rather than numbers.
C. E.O: OK. That sounds good to me. Let’s sort it out now.”
You heard one of them move towards the door, and you quickly slipped back to the stairs. You left work and spent the evening worrying about what you should do, if anything.
Explain the corporate governance issues of concern in the above communication between the CEO and the Brian the non -executive board director
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