[A] arguments [B] controversies [C] disputes [D] hostilities

正确答案：

(c) (i) For the secrecy option
Important developments at SHC
This is an exciting time for the management and shareholders of Swan Hill Company. The research and development
staff at SHC have made a groundbreaking discovery (called the ‘sink method’) that will enable your company to produce
its major product at lower cost, in higher volumes and at a much higher quality than our competitors will be able to
using, as they do, the existing production technology. The sink process also produces at a lower rate of environmental
emissions which, as I’m sure shareholders will agree, is a very welcome development.
When considering the options following the discovery, your board decided that we should press ahead with the
investment needed to transform. the production facilities without offering the use of the technology to competitors under
a licensing arrangement. This means that once the new sink production comes on stream, SHC shareholders can, your
board believes, look forward to a significant strengthening of our competitive position.
The business case for this option is overwhelming. By pushing ahead with the investment needed to implement the sink
method, the possibility exists to gain a substantial competitive advantage over all of SHC’s competitors. It will place SHC
in a near monopolist position in the short term and in a dominant position long term. This will, in turn, give the company
pricing power in the industry and the likelihood of superior profits for many years to come. We would expect SHC to
experience substantial ‘overnight’ growth and the returns from this will reward shareholders’ loyalty and significantly
increase the value of the company. Existing shareholders can reasonably expect a significant increase in the value of
their holdings over the very short term and also over the longer term.
Ethical implications of the secrecy option
In addition to the overwhelming business case, however, there is a strong ethical case for the secrecy option. SHC
recognises that it is the moral purpose of SHC to make profits in order to reward those who have risked their own money
to support it over many years. Whilst some companies pursue costly programmes intended to serve multiple stakeholder
interests, SHC recognises that it is required to comply with the demands of its legal owners, its shareholders, and not
to dilute those demands with other concerns that will reduce shareholder returns. This is an important part of the agency
relationship: the SHC board will always serve the best economic interests of its shareholders: its legal owners. The SHC
board believes that any action taken that renders shareholder returns suboptimal is a threat to shareholder value and an
abuse of the agency position. Your board will always seek to maximise shareholder wealth; hence our decision to pursue
the secrecy option in this case. The secrecy option offers the possibility of optimal shareholder value and because
shareholders invest in SHC to maximise returns, that is the only ethical action for the board to pursue. Happily, this
option will also protect the employees’ welfare in SHC’s hometown of Swan Hill and demonstrate its commitment to the
locality. This, in turn, will help to manage two of the key value-adding resources in the company, its employees and its
reputation. This will help in local recruitment and staff retention in future years.
(ii) For the licensing option
Important developments at SHC
Your board was recently faced with a very difficult business and ethical decision. After the discovery by SHC scientists
of the groundbreaking sink production method, we had a choice of keeping the new production technology secret or
sharing the breakthrough under a licensing arrangement with our competitors. After a lengthy discussion, your board
decided that we should pursue the licensing option and I would like to explain our reasons for this on both business and
ethical grounds.
In terms of the business case for licensing, I would like shareholders to understand that although the secrecy option may
have offered SHC the possibility of an unassailable competitive advantage, in reality, it would have incurred a number
of risks. Because of the speed with which we would have needed to have acted, it would have necessitated a large
increase in our borrowing, bringing about a substantial change in our financial structure. This would, in turn, increase
liquidity pressures and make us more vulnerable to rising interest rates. A second risk with the secrecy option would
involve the security of the sink technology ‘secret’. If the sink process was leaked or discovered by competitors and
subsequently copied, our lack of a legally binding patent would mean we would have no legal way to stop them
proceeding with their own version of the sink process.
As well as avoiding the risks, however, the licensing option offers a number of specific business advantages. The royalties
from the licences granted to competitors are expected to be very large indeed. These will be used over the coming years
to extend our existing competitive advantage in the future. Finally, the ‘improvement sharing’ clause in the licensing
contract will ensure that the sink process will be improved and perfected with several manufacturers using the
technology at the same time. SHC’s sink production may, in consequence, improve at a faster rate than would have
been the case were we to have pursued the secrecy option.
Ethical implications of the licensing option
In addition to the business case, there is also a powerful ethical case for the decision we have taken. As a good,
responsible corporate citizen, Swan Hill Company acknowledges its many stakeholders and recognises the impacts that
a business decision has on others. Your board recognises that in addition to external stakeholders having influence over
our operations, our decisions can also affect others. In this case, we have carefully considered the likelihood that keeping
the new technology a secret from our competitors would radically reshape the industry. The superior environmental
performance of the sink process over existing methods will also mean that when fully adopted, the environmental
emissions of the entire industry will be reduced. SHC is very proud of this contribution to this reduction in overall
environmental impact.
There seems little doubt that the secrecy option would have had far-reaching and unfortunate effects upon our industry
and our competitors. The licensing option will allow competitors, and their employees and shareholders, to survive. It
is a compassionate act on our part and shows mercy to the other competitors in the industry. It recognises the number
of impacts that a business decision has and would be the fairest (and most just) option given the number of people
affected.

正确答案：
(c) It has become increasingly common for audit firms to include a disclaimer paragraph within the audit report. However, it is
not a requirement of auditing standards and individual audit firms need to assess the advantages and disadvantages of the
use of a disclaimer paragraph.
The wording is used to state the fact that the auditor’s report is intended solely for the use of the company’s members as a
body, and that no responsibility is accepted or assumed to anyone other than the company and the company’s members as
a body.
The main perceived advantage is that the disclaimer should help to reduce the exposure of the audit firm to liability claims
from anyone other than the company or the company’s body of shareholders. The disclaimer makes it clear that the audit
firm reports only to those who appointed the firm, i.e. the members of the company, and this may make it more difficult for
the audit firm to be sued by a third party.
It is also argued that the use of a disclaimer could help to bridge the ‘expectation gap’ by providing a clearer indication of the
responsibility of the auditor.
In this way the audit firm can manage its risk exposure in an increasingly litigious environment. Recent high profile legal cases
against audit firms, such as the Bannerman case in Scotland, illustrate that an audit firm’s duty of care can extend beyond
the company and its shareholders, and that audit firms should consider how to protect themselves against liability claims.
Tutorial note: It is appropriate here to quote recent cases such as the Bannerman case to illustrate the reason why audit
firms face increased potential exposure to claims from third parties. However, knowledge of specific legal cases is not
required to gain full marks for this requirement.
However, it can be argued that a disclaimer does not necessarily work to protect an audit firm. Each legal case has individual
circumstances, and while a disclaimer might protect the audit firm in one situation, equally it may not offer any protection
where the facts of the case are different.
In addition, it is often argued that if an audit firm conducts an audit using full due care and diligence, there is no need for a
disclaimer, as a high quality audit would be very unlikely to lead to any claims against the audit firm. Consequently, it could
be argued that the use of disclaimers as a means to limit liability could permit low quality audits to be performed, the auditors
being confident that legal cases against them are restricted due to the presence of a disclaimer within the audit report.

正确答案：A

参考答案：C

正确答案：C

正确答案：
(c) The external reporting requirements (from the Sarbanes-Oxley section 404) being ‘too ambitious’ for small and medium
companies
There are several arguments to support Professor Leroi’s remark.
Fewer spare resources to carry out internal control. SMEs tend to operate with lower levels of spare resource than larger
businesses and conducting internal reviews would be more of a challenge for them.
The extra attestation fee (over and above normal audit fee) for the attestation of the internal control report could be a constraint
for many SMEs.
Lack of expertise from within existing employees (to internally audit/police as well as carry out internal activities) would be a
likely constraint.
SMEs will have fewer activities and less complexity, hence less need for shareholders to require the information (less to go
wrong).

正确答案：C

正确答案：A

参考答案：A

正确答案：True
解析：本句参考译文：演绎思维方式是指在开始先介绍主题，稍后陈述次要或支撑论据。【知识点来源：Unit 6】陈述正确。