Question 3
(a) Bert is right to be concerned. As finance director of the business he has a responsibility to all the shareholders of the business and not just the three active shareholders. The circumstances suggest that these three shareholders are hoping that the ‘sleeping’ partner will sell his share to the others at a price which does not reflect the true value of the business and asking Bert to play a part in misleading this shareholder.
As a qualified accountant Bert also has a professional responsibility to ensure that the information which he provides should be as timely and accurate as possible. Not including the potential impact in the forecasts being prepared for the strategic planning board meeting would mean that the decision making would be based on information which Bert and the three shareholders know is incomplete. The decision made will not then reflect the best information available.
(b) There are a number of governance issues which could arise in a small, family-owned company such as Bert’s employer:
·With a small number of shareholders who know each other very well and work full-time in the company it is possible that there will be a large amount of informal communication about what is happening in the business but a lack of transparency in the reporting. This could exclude the ‘sleeping’ partner and make it difficult for Bert to know what is happening in the company.
