There are ethical issues here such as their Responsibility, they need to

properly dispose of the resources used in the operation of the business. And

also, the Public Interest as a company they should be well seen by

consumers and buyers. Because if they come up with an issue that is not

appropriate related to the business it can have a bad effect on the running of

the business.

There is insufficient information given to offer a justifiable explanation for the drop
in accounts payable, considering the fact that revenue and inventory do not seem to
have changed substantially from the prior year.

Merchandise received at the end of the year but never recorded in accounts payable
may have impacted the decline in accounts payable and cost of goods sold. This
could result in understatement of both cost of products sold and accounts payable,
which may explain why gross profit increased.

Since Star Corporation does not use the perpetual inventory process, there is a
greater risk that unrecorded incoming inventory shipments near the end of the year
would substantially overstate the owner's equity and earnings while minimizing
liabilities. With control risk increased due to internal control weaknesses, the
possibility of management fraud cannot be overlooked.