NB: PLACE ORDER FOR QUALITY WORK
ASSESSMENT TASK – REPORT
Arshik Airlines
You started a new job as Onboard Services Manager at Arshik Airlines. You have a professional
qualification in Accounting. Your major job tasks include responsibilities related to passenger inflight
services and being in charge of flight crew catering expenses.
Arshik Airlines’ top management requires a new flight crew agreement that reflects airline industry
standards. Negotiations between the flight crew union and Arshik Airlines’ top management have gone
on for several months but achieved no significant compromises. One hot topic is Arshik Airlines’
responsibility under the current agreement to provide the flight crew with meal services. The flight crew
union wants to maintain the current meal requirements, while top management argues that the minimum
requirement established by industry standards is considerably lower. Neither side is interested in a
compromise.
Arshik Airlines is in a very tough financial position, so management has to cut costs in all aspects of the
business. One focus is the inefficient flight crew catering system, which requires a lot of checking and
monitoring. Your task is to analyse the overall costs of the system and explore possible savings from
management’s newly proposed system.
You reviewed many invoices sent to Arshik Airlines by Pilla Catering, a local airline catering company
that is the only licensed catering service with all the required certifications for Arshik Airlines’ base
airport. Enjoying a monopoly position, Pilla Catering charged high prices yet made sure to negotiate
favourable terms in its agreements with airlines, especially Arshik Airlines. About 70% of Pilla Caterings’
revenues came from providing services to Arshik Airlines, making Arshik Airlines a highly valuable
customer. Both companies depend strongly on each other. Without Pilla Catering, Arshik Airlines would
be unable to provide timely catering services on its flights.
Going through the invoices, you noticed a separate invoice not mentioned in the invoice control
instructions that your predecessor provided. Some “general catering services” were invoiced, but you
were unsure what these services were or why they were all invoiced on a separate bill. So, you decided
to share your concerns with your direct supervisor, Director of Customer Services Puss Pace. He said
that the invoice referred to a separate verbal agreement between Arshik Airlines’ and Pilla Caterings’
accounting departments. “These are some complicated accounting matters you shouldn’t worry about,”
Puss Pace said.
BAGB 99002 Assignment 2
“They know better how to properly invoice everything.” Puss Pace advised you to just sign your approval
of the invoice and forward it to the accounting department for payment.
As this situation seemed unusual, you inquired about the matter further from Arshik Airlines’ Chief
Accountant Mata Mathakanah. At first, Mathakanah seemed a bit nervous about your questions, saying,
“I think you should have been told about all these matters before. Your predecessor was aware of all
this, and Puss Pace knows as well.” Mathakanah explained what was going on. As Arshik Airlines
started facing continuously diminishing profit margins and increasing pressure to improve its financial
stability, the company’s Chief Financial Officer (CFO) employed all possible methods to show even the
slightest improvement in the company’s margins and a continuous decrease in Arshik Airlines’ costs.
One strategy was to make sure the company paid as little in taxes as possible. Mathakanah explained,
“All catering services related to the flight crew are actually subject to additional taxation for Arshik
Airlines. There’s a tax-free limit of £10 a day per crew member, but the actual catering cost is way above
this limit, and because of that we are taxed considerably more. In order to avoid these extra taxes, we
agreed with Pilla Catering that the amounts over the £10 limit would be billed separately as ‘extra
passenger services.’ It’s wrong, I know, but nothing can be done, I guess. Pilla Catering will never
decrease the prices, and the flight crew union will never agree to changes in the meal services.” Further,
the CFO was receiving bonuses averaging 170 per cent of his salary and the entire bonus was based
on the company’s financial and operating performance.
Shocked by Mathakanah’ story, you decided to discuss it with your closest friend, Mara Ope, who works
as an auditor in a major audit company. After listening to you, Mara Ope suggested you write an
anonymous letter to the relevant authorities and reveal the fraudulent practices. This would enable you
to remain unknown as a whistleblower so that you would not lose your job. You understood that
revealing fraudulent practices could result in unprecedented regulatory actions against the company,
including fines, ruined brand name, and possible hysteria in the mass media if the information became
public. At the same time, you also felt an ethical responsibility to take further action to resolve the matter.
In addition, you are truly concerned about becoming the whistleblower and losing your job at Arshik
Airlines.
BAGB 99002 Assignment 3
At this same time, a previous proposal you made to encourage recycling on board and reduce paper
boarding passes in line with international airline practices was rejected by the Director of Customer
Services Puss Pace, saying that the flight crew will not agree to a change in their work routines,
especially with the new flight crew agreement that is being negotiated to cut their meal requirements.
He dismissed the paper less boarding passes saying “I don’t think our customers are that sophisticated
yet”
Based on the above case:
SECTION A
Write a report to the top management of Ashik Airlines addressing all of the aspects below.
1. Is the deadlock between Arshik Airlines’ top management and flight crew union, a business
ethics issue? Explain and recommend a framework for Arshik Airlines to resolve such issues.
2. The statements made to you by the Director of Customer Services and Chief Accountant, and
the fear of reprisal for being a whistleblower highlight weakness in the organisation culture of
Arshik Airlines. Recommend how Arshik Airlines could change its culture to become an ethical
company.
3. Analyse the remuneration policy of the CFO from a corporate governance perspective and
make recommendations for executive remuneration at Arshik Airlines with reference to the UK
Corporate Governance Code.
4. Analyse the relationship between Arshik Airlines and Pilla Caterings from a CSR perspective
and recommend what actions Arshik Airlines could take to fulfil its social responsibility.
5. Arshik Airlines is ignoring some industry-wide CSR initiatives. Explain the relevance of these
initiatives and recommend framework for Arshik Airlines to take its CSR obligations more
seriously.
BAGB 99002 Assignment 4
SECTION B
Write an article to the magazine (publication) of the professional accounting body you represent on the
below (without any specific references to the company, individuals or yourself)
As a professional explain how you would deal with the issue of ‘separate invoices’ having regard
to the parties involved (Director of Customer Services – your direct supervisor, CFO and Chief
Accountant). Do you agree with the course of action suggested by your friend? (Refer to the
CIMA code of ethics)
MARKING CRITERIA FOR THE REPORT
ASSESSMENT ITEM MARKS ALLOCATED
SECTION A – WORD LIMIT: 3000
1. Is the deadlock between Arshik Airlines’ top management and
flight crew union, a business ethics issue? Explain and
recommend a framework for Arshik Airlines to resolve such
issues
15
Explain the issue 5
Recommend a framework 10
2. The statements made to you by the Director of Customer
Services and Chief Accountant, and the fear of reprisal for
being a whistleblower highlight weakness in the organisation
culture of Arshik Airlines. Recommend how Arshik Airlines
could change its culture to become an ethical company.
20
Analyse the organisation culture 5
Explain the importance of organisation culture in ethics 5
Recommend how to create an ethical company 10
3. Assess the remuneration policy of the CFO from a corporate
governance perspective and make recommendations for
executive remuneration at Arshik Airlines with reference to
the UK Corporate Governance Code
15
Assess the impact of the existing remuneration policy 5
Recommend a suitable policy with reference to the Code 10
4. Analyse the relationship between Arshik Airlines and Pilla
Caterings from a CSR perspective and recommend what
actions Arshik Airlines could take to fulfil its social
responsibility
15
Explain the CSR issue 5
Recommend actions 10
5. Arshik Airlines is ignoring some industry-wide CSR
initiatives. Explain the relevance of these initiatives and
recommend framework for Arshik Airlines to take its CSR
obligations more seriously
15
Explain the importance of the CSR initiatives 5
Recommend a CSR framework 10
BAGB 99002 Assignment 5
SECTION B – WORD LIMIT: 500
As a professional explain how you would deal with the issue of
‘separate invoices’ having regard to the parties involved (Director
of Customer Services – your direct supervisor, CFO and Chief
Accountant). Do you agree with the course of action suggested
by your friend? (Refer to the CIMA code of ethics)
20
Identify the professional ethics involved 10
Recommend course of action with reference to CIMA code of conduct 10
[TOTAL: 100 MARKS]
OTHER REQUIREMENTS (WHERE APPLICABLE)
List of Contents
This should list in sequence, with page numbers.
List of Tables and Figures
The lists of tables and figures (diagrams, graphs, illust