Background informationFrom: Billy Wallace(procurement department)Sent: Wednesday 16 September 20X8To: Paul Yan (finance...Background informationFrom: Billy...

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Accounting

Background information
From: Billy Wallace(procurement department)
Sent: Wednesday 16 September 20X8To: Paul Yan (finance department)Subject: FW: Ottoman Cycles
Paul,
I’ve just receivedthe email (below) from John Doe. Billy
From: John Doe(safety manager)
Sent: Tuesday 9September 20X8
To: Billy Wallace(procurement department)
Subject: Ottoman Cycles Greetings,
Thanks for the greatInduction to Myer and my new role as Myer safety manager. Thereisn’t much I don’t know about the average factory, but I do takeyour point: it is quite different being on this side of the fence.As you know, I’ve certainly seen quite a few manufacturers in mytime
… after all, lots oftime on the factory floor is what you’d expect from someone with myunion background. So, I’m confident that this role is made forme.
I visited OttomanCycles yesterday. The local management team have been busy over thelast few months. The factory expansion has been completed with newand second-hand machinery purchased and installed. The factory isnow fully operational and deliveries are recommencing.
I did notice that oneof the machines was a MAJOP1, which makes sense as it’s $100,000cheaper than the PCJB. The MAJOP1 was widely used in Australia upuntil a couple of years ago but
the union pushedhard to get rid of them – the MAJOP1s were involved in quite a fewserious injuries and a couple of deaths. I’m told that the machinehas been in operation at Ottoman Cycles for over a year. I’vechecked the accident register at Ottoman Cycles and there aren’tany serious incidents recorded. Mr Khan is pretty confident thatthere won’t be any problems and isn’t interested in getting rid ofthe MAJOP1.
To be honest, it’svery clear that there’s no way Ottoman can fund the replacement asit’s very clear that they don’t have spare cash or any ability toraise a loan. Both what to do and funding it will be an issue forMyer as a major shareholder. This is an ethical issue for Myer.
Everyone here isgetting ready for the upcoming stocktake and seem pretty confidentthat inventory records are accurate. Yesterday the warehousemanager showed me around and was able to point out the areas whereparts have been borrowed for urgent machine repairs – they’ll bereplaced before the count so it’s all looking good.
I’m heading off toVietnam next, and will catch up with you again after that.Cheers,
John
End of background information
Required
The board isquerying the decision to invest in Ottoman Cycles. The board wantsgreater oversight of the Ottoman Cycles investment.
(a) (i) Identify thegovernance issues that the board should be concerned about inrelation to its investment in Ottoman Cycles
(ii) Based on theabove concerns, discuss measures that the board could request toensure it has sufficient oversight over Ottoman Cycles
(b) The board isparticularly concerned about inventory. You have been asked toaccompany the internal auditors at the Ottoman Cycles stocktake.Kim has heard rumours that there have been no formal inventorystocktake in the past. In preparation for the stocktake you havearranged a meeting with John Doe as he has recently visited thefactory.
Identify potentialinventory issues. Discuss why these issues are important and howthese issues could, if at all, impact the reported results forMyer.

Answer & Explanation Solved by verified expert

4.5 Ratings (587 Votes)

aiGovernance issues John Doe the safety manager pointed out that usage of MAJOP1 caused several serious injuries and a couple of deaths in Australia which finally resulted in removing the machines due to pressure from the union As stated Ottoman Cycles factory has been using MAJOP1 machinery over a period of one year and no serious incidents are mentioned in the register Further it is apparent that Ottoman Cycles is not in a position to replace MAJOP1 machine with a safer machine like PCJB since it requires an additional 100000 and Ottoman Cycles is neither have spare cash nor can avail a loan See Answer

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In: AccountingBackground informationFrom: Billy Wallace(procurement department)Sent: Wednesday 16 September 20X8To: Paul Yan (finance...Background informationFrom: Billy Wallace(procurement department)Sent: Wednesday 16 September 20X8To: Paul Yan (finance department)Subject: FW: Ottoman CyclesPaul,I’ve just receivedthe email (below) from John Doe. BillyFrom: John Doe(safety manager)Sent: Tuesday 9September 20X8To: Billy Wallace(procurement department)Subject: Ottoman Cycles Greetings,Thanks for the greatInduction to Myer and my new role as Myer safety manager. Thereisn’t much I don’t know about the average factory, but I do takeyour point: it is quite different being on this side of the fence.As you know, I’ve certainly seen quite a few manufacturers in mytime… after all, lots oftime on the factory floor is what you’d expect from someone with myunion background. So, I’m confident that this role is made forme.I visited OttomanCycles yesterday. The local management team have been busy over thelast few months. The factory expansion has been completed with newand second-hand machinery purchased and installed. The factory isnow fully operational and deliveries are recommencing.I did notice that oneof the machines was a MAJOP1, which makes sense as it’s $100,000cheaper than the PCJB. The MAJOP1 was widely used in Australia upuntil a couple of years ago butthe union pushedhard to get rid of them – the MAJOP1s were involved in quite a fewserious injuries and a couple of deaths. I’m told that the machinehas been in operation at Ottoman Cycles for over a year. I’vechecked the accident register at Ottoman Cycles and there aren’tany serious incidents recorded. Mr Khan is pretty confident thatthere won’t be any problems and isn’t interested in getting rid ofthe MAJOP1.To be honest, it’svery clear that there’s no way Ottoman can fund the replacement asit’s very clear that they don’t have spare cash or any ability toraise a loan. Both what to do and funding it will be an issue forMyer as a major shareholder. This is an ethical issue for Myer.Everyone here isgetting ready for the upcoming stocktake and seem pretty confidentthat inventory records are accurate. Yesterday the warehousemanager showed me around and was able to point out the areas whereparts have been borrowed for urgent machine repairs – they’ll bereplaced before the count so it’s all looking good.I’m heading off toVietnam next, and will catch up with you again after that.Cheers,JohnEnd of background informationRequiredThe board isquerying the decision to invest in Ottoman Cycles. The board wantsgreater oversight of the Ottoman Cycles investment.(a) (i) Identify thegovernance issues that the board should be concerned about inrelation to its investment in Ottoman Cycles(ii) Based on theabove concerns, discuss measures that the board could request toensure it has sufficient oversight over Ottoman Cycles(b) The board isparticularly concerned about inventory. You have been asked toaccompany the internal auditors at the Ottoman Cycles stocktake.Kim has heard rumours that there have been no formal inventorystocktake in the past. In preparation for the stocktake you havearranged a meeting with John Doe as he has recently visited thefactory.Identify potentialinventory issues. Discuss why these issues are important and howthese issues could, if at all, impact the reported results forMyer.

Required
The board isquerying the decision to invest in Ottoman Cycles. The board wantsgreater oversight of the Ottoman Cycles investment.
(a) (i) Identify thegovernance issues that the board should be concerned about inrelation to its investment in Ottoman Cycles
(ii) Based on theabove concerns, discuss measures that the board could request toensure it has sufficient oversight over Ottoman Cycles
(b) The board isparticularly concerned about inventory. You have been asked toaccompany the internal auditors at the Ottoman Cycles stocktake.Kim has heard rumours that there have been no formal inventorystocktake in the past. In preparation for the stocktake you havearranged a meeting with John Doe as he has recently visited thefactory. Identify potentialinventory issues. Discuss why these issues are important and howthese issues could, if at all, impact the reported results forMyer.