1. Recap the major issues in this case. What is/are the ethical dilemma(s) in this case?
The major issues in the case are questions of violations of the fundamental principles of accounting ethics. The primary ethical dilemma experienced by Jane Ashley is the proper course of action in dealing with the actions of her superiors Frankie Small and Mr. Vicio of covering a discrepancy in the items under audit, which in the point of view of Ashley is inconsistent with standards of good practice and inimical to the long-term interest of the client Models Inc.
2. Did Jane Ashley, the staff accountant, have any legitimate choice except to follow the direction of the partner on the job with regard to what happened on the job?
Jane Ashley has the option of putting into record her disagreement with the decision of the partner but she has to comply with orders unless she can find an alternative legitimate way of solving the problem.
3. Outline your understanding of the cut-off problem that has developed. What issues are involved?
Models Inc. has several suppliers, which the firm scheduled for payment. In auditing the accounts payable, the person in-charge looks into expense reports, invoices and other supporting documents to trace and account for payments. However, there were several missing documents, which may not be found and the person in-charge is faced with the dilemma of deciding on how to reflect the insufficiency of data in the audit report.
4. What are the fundamental principles underlying a professional accountant’s code of ethics applicable to this case?
There are five fundamental principles forming the foundations of the accountant’s code of ethics, which are: 1) integrity—being straightforward and honest; 2) objectivity—freedom from prejudice or bias and conflict of interest; 3) professional competence and due care—maintaining standards for professional knowledge and skills; 4) confidentiality—preservation of the privacy of clients and non-disclosure of sensitive information; and 5) professional behaviour—compliance with law and professional standards.
5. What, if anything, should Jane Ashley do under the circumstances?
Jane Ashley may voice her opinion on the decision of the partner to her senior or to the partner. She should look for legitimate ways of resolving the lack of documentation and suggest this to the partner. If there is no way to find the missing documents, the she can find guidance in the company policies and accountant’s code of ethics.
To Resign or Serve?
1. What is/are the ethical dilemma(s) in this case?
The initial ethical dilemma of Ben Hunt revolves around integrity and professional competence on whether or not to report the risky and inimical practices of their client and the succeeding ethical dilemma revolves around objectivity and confidentiality on whether or not Ben Hunt should apprise concerned parties of the business practices of Prairieland.
2. Was the renegotiation of overdue loans to current correct? If not, are there any conditions under which a “current” classification would be warranted?
Renegotiation to report the overdue loans as current loans is practiced but it is a risky move because the bank’s non-recognition of the possibility that a debtor may not be able to pay decreases its credibility to declare the loan later on as non-performing and invoke security nets in claiming payment.
3. Was the arrangement for insurance against non-payment of loans and/or Prairieland’s (non)disclosure of the insurance arrangement acceptable? If not, how should it have been handled?
Even with an insurance against non-payment of loans obtained by the bank, the risk is still high because insurance companies conduct thorough investigation to ensure that the bank is not deliberately lax on their demands for payment since the payment of loans is insured. The non-disclosure of the insurance arrangement is also not acceptable because this is an important information to the accounting firm. The bank should practice reasonable loan assessments and disclose valuable information.
4. As James London/Ben Hunt, what would you have done? What (if any) other options were available to James London/Ben Hunt beside resignation?
If I were James London/Ben Hunt, I would have supported the resignation. This is because when Ben Hunt expressed his concern over the banking practices of the client, the representatives of the bank were adamant. Provided Hunt and London explained the risks thoroughly but the bank still refused to budge, then there is no other option for Hunt and London but to resign.
5. In this situation, what responsibilities does Jack London/Ben Hunt have to various stakeholders?
The responsibility of Hunt and London to inform stakeholders is subject to the confidentiality of information. Unless the bank and its representatives permit the disclosure or the disclosure is called for in a legal proceedings or in other authorized venues of disclosure, both Hunt and London are barred from disclosing sensitive information to stakeholders who are not a party to their previous business dealings.
What are your thoughts on this situation?
1. What do you think are his concerns?
Jeff’s primary concern is the possibility that the judgment of Trevor regarding their client’s billing practices may have been clouded by Trevor’s personal relationship with the accounts receivable supervisor of their client company. The development of the personal relationship between the auditor and client gives rise to questions of conflict of interest of Trevor because he could have made a favourable report on the client company to be on the positive side of Fleurette or his objective judgment may have been overpowered by his personal emotions towards a representative of the client company. In this cases, the integrity of Trevor’s report becomes questionable and unreliable.
2. What actions can be taken to address his concerns?
Jeff has to make sure that the report passed by Trevor on the practices of the client are accurate and supported by sufficient documentary evidence to ensure the integrity of the entire audit report. During the remaining days before the report presentation, Jeff should remove Trevor as part of the audit team working with the client company to prevent further issues on the validity of the report. Jeff should also have Jeff’s report validated before the final report to ensure the accuracy of the favorable recommendations to the client. As a preventive measure, Jeff should also remind his employees or staff of their duties provided by the accountant’s code of ethics and the importance of practicing objectivity to the profession.
Credit:ivythesis.typepad.com
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