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D550 – Ethics for Accountants
Name – Student ID
Task 1
A. Ethical Decision-Making Model
Narrative
1. Identify the ethical and professional issues
(ethical sensitivity):
- GAAS
A deficiency in the client’s inventory system was found which lead to the double counting of some inventory items. The amounts are not large, but GAAS requires these deficiencies be reported to management so that action can be taken to correct the problem in the system that led to the double counting.
- Stakeholders/Interests The client The auditors
The investors
- Ethical/Professional Standards Due Care: Auditors need to be professional and thorough when performing their duties. Integrity: Barbara should not allow the objections of the majority, time pressures, personal embarrassment, or other factors, persuade her to act against her own professional judgment.
2. Identify and evaluate alternative courses of action
(ethical judgment):
- Legal Issues: By violating GAAS and ignoring problems, the audit company may be exposed to legal consequences, especially if the deficiency turns out to be more serious than originally thought.
- Alternatives/Analysis Go along with the majority: o Barbara feels uncomfortable with this decision and knows she would be violating GAAS by deferring her judgment to
o Barbara should do what is right, even if the consequences to herself are negative.
3. Use ethical reasoning to evaluate the
alternative courses of action (ethical focus):
- Going along with the majority: How will Barbara feel if a major issue is found later that could have been mitigated if she had not stayed silent? How will Barbara feel about herself if she stays silent and suborns her judgment to the judgment of the majority? Will giving in this time create a slippery slope leading Barbara to continue rationalizing these kinds of professional lapses with, perhaps, serious consequences including legal peril, loss of self- respect, or civil actions?
- Reporting the deficiency to the senior auditor: Is being popular and going along to get along more important to Barbara than her integrity? If reporting the deficiency leads to discovering a more serious deficiency or even fraud, will Barbara’s decision help her to feel
vindicated in her decision to maintain her own integrity and judgment?
4. Take action (ethical
character):
Barbara should take the time to explain her reasoning to her colleagues, reminding them that, as accountants and auditors, they have a duty to the public to ensure that the audit is done according to professional standards. Barbara should also remind her colleagues of the possible legal and civil penalties that could be imposed if a shoddy audit is completed and serious mistakes or even fraud are discovered later that could have been prevented by a professionally completed audit. Barbara should ultimately decide to take the high road, stick to her professional and personal ethics, and report the matter to her superior, even if the decision is unpopular. (Mintz & Miller, 2023, pp. 71-75)
B. Giving Voice to Values Framework
Narrative
1. What are the main arguments you are trying
to counter?
There was only a small number of inventory items double
counted so it’s an immaterial deficiency that needn’t be investigated.
The team may get in trouble with the boss for missing the items
during the audit.
The audit is already behind schedule and making time
to investigate this minor issue will only make things more expensive for the employer and the client.
The team will look incompetent.
The boss is strict about keeping under budget and the client
cannot be billed for any extra time spent on the audit.
2. What is at stake for the key parties, including
those who disagree with you?
The team’s integrity is at stake. The audit company’s reputation could be damaged if the deficiency comes to light later and it is determined that the team didn’t practice due care during the audit.
The audit company could face severe criminal and civil penalties if it is discovered that a major problem such as fraud or malfeasance existed that could have been uncovered had the deficiency been investigated properly. The boss could become irate if the deficiency is brought up and it causes the audit to go over budget.
3. What levers can you use to influence those
who disagree with you?
Barbara could talk with the individual members of the audit team privately about the ethical issue and attempt to gain allies. Barbara could remind the team about the risks associated with ignoring potentially significant errors or fraud if the issue is not dealt with properly. These risks may include civil or even criminal sanctions. Barbara could appeal to the team’s sense of duty and remind them that their reputations, integrity, and professionalism are in danger and that ignoring a potential problem, although seemingly minor, could lead down a slippery slope of rationalization.
The boss may be upset at a cost overrun, but that is not an excuse to neglect the team’s professional duty to make a complete audit. (Mintz & Miller, 2023, pp. 76-80)
C. Sources
Mintz, Steven M. & Miller, William F. (2023). Ethical Obligations and Decision Making in Accounting. McGraw-Hill LLC. https://prod.reader- ui.prod.mheducation.com/epub/sn_ea1d8/data- uuid-165aaab94b94470e809d751a40bbf1e
