Ethical Issues Associated with Job Automation

1. Dentify and discuss the main ethical issues associated with job automation.

2. Determine the norms, principles and values relevant to the issue of job automation.

3. Identify two companies in two different industries that might be impacted by job automation. Discuss the advantages and disadvantages for these companies in adopting artificial intelligence or job automation.

4. Based on your answer to part (3) above, choose one company and identify the stakeholders most likely to be affected by job automation. Describe each stakeholder, their probable concerns and how they are likely to be affected.

The process of job automation refers to the technology by which the business procedure is performed without the assistance of any human being. It is done automatically with the help of technology. Various control systems such as hi-tech machineries, robotics, boilers, stabilization ships and aircrafts stimulate the process (Patel et al 2018). It is a completely automated technique of getting the work done effectively without involving human labour force. As technology is advancing, machineries are replacing the labour. However, some ethical issues that the job automation is facing are as follows:

Unemployment: As there are continuous, inventions regarding the making the processes of the jobs automatic, the complex roles of the individuals in the jobs can be replaced. Technology is reducing the dependence on the human labour and making the job processes automatic that saves time and cost. However, it can be said that the process of automating the job roles is a cause for increasing the threats of unemployment (Nokelainen, Nevalainen & Niemi 2018). The labours that were dependent in the job roles are now have to face threats due this innovation in the work.

Inequality: The system of the economy is such that it is assessed through the hourly wage rate. The majority of the companies are dependent on the hourly production of work by the labour force whereas the techno savvy companies in lesser time can generate more efficiency and production. Therefore, there is an inequality in economy that can also lead to a limitation while calculating the net production.

Artificial stupidity: There can be at times failure in the artificial intelligence due to some technical faults. In such cases, the company can face a huge financial loss and distress. This can be a issue that the process of job automation may face (Salman, Majeed & Alsahlawi 2017).

Norms, Principles, and Values Relevant to Job Automation

Security issues: As the technology becomes more sound the treat or security and fraud increases side by side. There are hackers who can easily manipulate the automatic machines and get all the information stored in the machines that are confidential. This can be a major ethical issue.

The various principles of Job automation are as follows:

Elimination of manual procedures: The automation replaces the manual procedures with the online rules

Automation rules:  The rules in the process of automation must be kept flexible as the nature of each machine differs.

Keeping the process simple: The automation happens in small steps but the steps are complex therefore, it is necessary that the technology used should be simple.

 Training of the developers of automation: The various individuals who are operating the automation should be well trained and must know the exact technique of execution of automation.

The two companies that have adapted the automation are Hitachi and Siemens. Hitachi deals with electronics and Siemens deals with construction. The various advantages and disadvantages the company faces in automation are:

 The advantages are:

Less time in production: – The automation speeds up the time of production as no thinking is needed by the machine it is done automatically.

Increase in accuracy and repeatability – the automated machine does the work faster and accuracy is maintained, as there is no confusion. It works according to the program set.

No human error – Human beings are prone to mistakes, when the machine works it works automatically within the control of the programs therefore there is less errors (Chui Manyika & Miremadi 2015).

No employee cost -The companies that have adapted the automation technology has replaced the labour force as a result there is reduced employee cost.

Higher volume production – The companies work through automatic machines where there is systematic spontaneous operations therefore the volume of production is increased.

The disadvantages are:

Lack in versatility – The automation works automatically with specific operations there is no human brain involved in it resulting in no innovation and versatility.

Large initial investment – Automated machines can be one of the most costly operating costs for a company.  The initial capital investment is huge and there is cost of installation associated with it.

Increase in unemployment – Automation increases the rate of unemployment by replacing work force with machines, reducing job opportunities.

Unpredictable costs –There are many costs including research and development costs of automating a process, the cost of training employees to operate automated machines and preventative maintenance costs (Lacity & Willcocks 2016).

Companies Impacted by Job Automation – Advantages and Disadvantages

The stakeholders of the chosen automation company Siemens include (Groover 2016):

Board of directors: The board of directors must know the various levels of information related to the automatic machine that enhances the automation process; they are needed to be made aware of the working of the machines that enhances the productivity in business.

Executives: The executives help in the working of the business if they are not made aware of the automation process, and how it works it works be difficult for them to supervise the management.

Management: The management is the most essential part of the business that regulates the operation of the business. It is essential for them to be informed of the various nature of the machines and the technologies to get effective results.

Contributors: The contributors are the other stakeholders who are related to the business; they are needed to be aware to the process of automation so that the working becomes smooth and regulated.

Various obligations for the purpose of financial reporting of the public company is depended on the fact that whether the company is –

• Not the disclosing entity
• Is limited by the guarantee
• Not the disclosing entity or not the company that is limited by guarantee

Not the disclosing entity –

The public company which is not the disclosing entity does not require to company with the Part 2M.3 of Corporations Act if all the conditions as per ASIC Corporations Instrument 2016/785 are complied with and it is not –

• The borrowing corporation
• Guarantor for such borrower
• The license for financial services (gov.au 2018)

And the company –

• Is wholly owned company
• Undertaken the deed for cross guarantee with each other company under the closed group

These companies are not required to prepare the audited financial statement to lodge with ASIC or to send it to the members.

Is limited by the guarantee –

When directed by any member of ASIC or the company, the company shall prepare –

• Annual financial reports
• Director’s report with particular disclosures as per section 300B of Corporations Act

Those are –

• Prepared as per Chapter 2M
• Reviewed or audited

The company shall notify the members regarding the annual report.

Not the disclosing entity or not the company that is limited by guarantee –

These companies must prepare the annual financial reports as per Chapter 2M of Corporation Act 2001. Further, the financial reports shall be –

• Audited
• Lodged with the ASIC within 4 months period of end of the financial year
• Sent to the members within 4 months of the closing of financial year or prior to 21 days of next AGM, whichever is before.

1. Accounting equation

Assets = Liabilities + Equities

Accounting equation at beginning –

Total assets = Liabilities + Equities

$ 6040.8 m = $ 5142 m + $ 898.8 m

Accounting equation at beginning –

Total assets = Liabilities + Equities

$ 6355.8 m = $ 4782 m + $ 1573.8 m

1. Audit

The financial statement of Virgin Australia for the year ended 2017 was audited by KPMG. As per their opinion the financial report of the company is prepared in compliance with Corporation Act 2001 and –

• Gives true and fair view of the company’s financial position as on 30^th June 2017 and financial performance of the of the company on the closing of year (Svanström 2013)
• Complied with the Corporations Regulations 2001 and Australian Accounting Standards

1. Additional services by auditor

Stakeholders Affected by Job Automation – A Case Study Analysis

KPMG apart from audit services provided some non-audit services during the year. The details regarding the services are –

• Assurance services related to transactions for raising debt, compliance with the service level agreements and various other assurance procedures for non-financial statements
• Taxation services
• Other services that includes due diligence and services associated with capital restructure, advice regarding accounting matters, divestments and procedures those were agreed upon.

1. Non – current assets

Largest non-current asset of the company is Property, Plant and property and its opening book value is $ 2872.8 million and closing book value is $ 2916.6 million. The asset is stated at cost reduced by the amount of impairment loss and accumulated depreciation.

1. Depreciation method

For property, plant and equipment depreciation is charged on the basis of straight line method over the assets estimated useful life.

1. Revenue

As per the financial statement for the year ended 2017 largest source of revenue is the revenue from Airline passenger. The amount of revenue from this source is $ 4,275.3 million out of total revenue of $ 5,047.3 million (Weygandt, Kimmel & Kieso 2015).

Other ancillary revenue includes the – (i) revenue from redemption of the credit voucher when the carriage is complete or the credit voucher is not expected to get redeemed by passenger (ii) revenue earned from provision of various airline related services that includes charter revenue, on-board sales, other product revenue and freight revenue (Fraser and Ormiston 2016).

1. Finance cost

Finance cost expenses for the year ended 2017 was $ 184.7 million. The expenses have been increased from $ 181 million in 2016 to $ 184.7 million in 2017.

1. Contingent liabilities

The company did not have any contingent liabilities as at 30^th June 2017.

1. Issue of share

Virgin Australia issued 4400.6 million shares during the year 2017. The capital increased by $ 934.3 million owing to the issuance of shares.

1. Loss for the year

Net loss of the year for Virgin Australia amounted to $ 185.8 million. On the other hand, the net cash flows from the operating activities amounted to $ 273.9. Amount of operating profit is larger as compared to the net loss. Reason of difference between the amounts is that the operating cash flows are computed by taking into account the net income, changes in the working capital and non-cash expenses. On the other hand, the net income is computed through subtracting the cost of sales, depreciation, interest, operational expenses and taxes from total revenues (Virgin Australia 2018).

1. Unearned revenue

Various elements reported under liability as unearned revenue are as follows –

• Unearned passenger revenue amounted to $ 647.7 million
• Unearned loyalty program revenue amounted to $ 412.8 million
• Credit vouchers amounted to $ 13.5 million
• Other unearned revenue amounted to $ 0.2 million (Virgin Australia 2018).

This is expected for the company under this sector as computation for unearned revenue from passengers associated with sales of tickets requires judgements and estimates. It also includes the assessment of the historical passenger for non-attendance rates to determine probability that contractual rights of the passengers will be exercised.

1. Director’s report and director’s declaration

Financial Reporting of Public Companies – A Brief Overview

The director’s report includes the details regarding the directors and alternate directors like name, experience, qualification and special responsibilities. It further includes details of directors meeting, director’s interest, financial and operating review, remuneration report, key management personnel, executive’s remuneration overview and share options (Abeysekera 2013).

On the other hand, the director’s declaration includes the director’s opinion regarding whether the consolidated financial statement of the company has been prepared as per Corporation Act 2001. Further, it included declaration regarding whether the company will b able to meet liabilities or obligations. The directors further gave the declaration regarding whether the company followed requirement under section 295 A of Corporation Act 2001 or not.

Both are required as director’s report includes details of directors while the director’s declaration includes compliance of various regulations.

1. Annual reports

Apart from the annual report, half year reports are also published by the company to comment on the material transactions and events for the period and its impact on the company’s financial position.

The half year report covers the period from 1^st July 2016 to 31^st December 2016.

Ratio	Formula	Result
Return on equity	Profit before interest and tax / Average equity	-0.10
Return on assets	Profit before interest and tax / Average assets	-0.02
Profit margin ratio	Net profit/Revenue	-0.04
Asset turnover ratio	Net sales / average total assets	0.81
Current ratio	Current assets / current liabilities	0.76
Debt to equity ratio	Total liabilities / Total equity	3.04
Interest coverage ratio	Profit before interest and tax / interest expenses	-0.66
Debt coverage ratio	Profit before interest and tax / debt payment	-0.09
Price earning	Stock price per share / Earning per share	5.71
Dividend per share	Given	Nil

References

Abeysekera I 2013. A template for integrated reporting. ‘Journal of Intellectual Capital’ Vol –  14(2), pp.227-245.

Asic.gov.au 2018. Reporting obligations for public companies | ASIC – Australian Securities and Investments Commission. [online] Available at: https://asic.gov.au/regulatory-resources/financial-reporting-and-audit/preparers-of-financial-reports/reporting-obligations-for-public-companies/ [Accessed 14 Apr. 2018].

Chui Manyika J & Miremadi M 2015. Four fundamentals of workplace automation. ‘McKinsey Quarterly’, 293 pp.1-9.

Fraser L M and Ormiston A 2016. ‘Understanding Financial Statements’ Pearson Higher Ed.

Groover M P 2016 Automation, production systems, and computer-integrated manufacturing. Pearson Education India.

Lacity M C & Willcocks L P 2016 A new approach to automating services. ‘MIT Sloan Management Review’ vol – 58(1), p.41.

Nokelainen Nevalainen & Niemi 2018 Mind or Machine? Opportunities and Limits of Automation. In ‘The Impact of Digitalization in the Workplace’ pp 13-24 Springer, Cham.

Patel Devaraj Hicks & Wornell 2018. County-level job automation risk and health: Evidence from the United States. ‘Social Science & Medicine’ 202, pp.54-60.

Salman Majeed M. & Alsahlawi 2017 March. Automation of a Fault Management System for Bahraini Telecommunication Companies. In ‘International Conference on Information Technology and Communication Systems’ pp. 60-69 Springer, Cham.

Svanström T 2013. Non-audit services and audit quality: Evidence from private firms. ‘European Accounting Review’ Vol – 22(2), pp 337-366.

Virgin Australia 2018. Virgin Australia | Book flights & holidays with Virgin Australia. [online] Available at: https://www.virginaustralia.com/au/en/ [Accessed 14 Apr. 2018].

Weygandt J J Kimmel P D and Kieso D E 2015. Financial & managerial accounting. John Wiley & Sons.