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Analysis of Ethical Dilemma Case in Business
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 Sarbanes–Oxley Act
 Audit
 Auditor's Report
 Business Ethics
 Accounting

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You are on page 15of 17

 
13 policies and
procedures
implemented in
the organization.
Several
companies have
discipline policies
which impose
penalties on
employees who
do not concur
with or follow
the policies.Empl
oyees usually
make decisions
which provide
them with rewards
and provide safety
formdisciplinary
action. Following
the ethical code of
conduct may also
bring intrinsic
rewards andsave
employees from
penalties and
punishments.
Alternatively
when an ethical
code of conductis
not effectively
implemented in an
organization,
employees may
make decisions
which
areunethical or
immoral for
gaining extrinsic
or intrinsic
rewards without
fear of any
penalties
beingimposed
(Ferrell,
Fraedrich, &
Ferrell, 2000
pp. 141-164).In
the current
situation A’s
supervisor has
replaced
the original
qualified report
with a unqualified
report for the
benefit of the
client which could
result in
confirmation of
the
client’saccount to
the company and
both A and his
supervisor could
get rewards after
the confirmationof
the account. Mr.
A would also get
promoted to
a higher level in
the organization if
the clientsigns a
contract for future
services. As ABC
Company is
more profit
oriented and
although anethical
code of conduct
is present in the
company but it is
not implemented
quite effectively.
The present
scenario would
motivate any
person in place of
Mr. A but he has
quite strong
personalethical
values which
create a dilemma
for him and he is
now confused
whether to ignore
theactions of his
superior and let
the unqualified
audit report pass
on to the superiors
or report
thesituation to the
superiors. If A
ignores the matter
it may result in
rewards for A in
the form of
a promotion and if
he reports the
matter
to superiors it may
result in failure of
acquiring
theclient’s
account which
may prove quite
beneficial for the
company in
monetary terms in
future periods of
operation. Thus
the rewards
and discipline
culture of an
organization
impacts
thedecisions of a
person in an
ethical dilemma
quite
significantly.
 

14
Course of Action
The audit report
now in the records
of ABC does not
have A’s name as
the
reportsubmitted
by him was
removed by Mr. B
and a negative
evaluation of his
performance
andinstead of
getting the
important one
year promotion he
faces the threat of
being removed of
his position from
the accounting
firm. The options
available to A
include leaving
the matter as it
isand not
reporting it to
anyone; he has the
right to take
this matter to his
partner counselor
or  personnel
department. He
personally feels
that he should
report this matter
to an
independentrevie
w board but a
board like this is
inexistent in
ABC.A is a
person who
strongly believes
in the ethical and
moral duties of
an auditor
andstrictly abides
by them. He had
discussed the
report released by
Senator Lee
Metcalf
whichcovered the
biasness of
accounting firms
towards their
clients with
various partners
of the firmand got
the impression
that the partners
strictly believed in
the ethical and
moral
representationof
clients. It should
also be noted that
it has become
more important
for auditors
to follow thecode
of ethics
especially after
the
implementation of
the Sarbanes-
Oxley Act which
requires
theauditors to
strictly follow the
code of ethics
under section 103
(U.S Congress,
2002). This
wasthe reason
ABC had its
reputation of
setting high
standards of ethics
during the
auditing processof
different
companies. This
indicates that if A
discusses the
matter with one of
the partners,some
action might be
taken in respect of
the situation.In
order to provide
a course of action
we must compare
the benefits and
shortcomings
of the options
available to A. If
A selects the first
option and does
not report
the incident to
anyone
 

15there would be
no benefit to him
but the company
may benefit in
case the client
account isacquired
exclusively. The
first option holds
many
disadvantages
for A as the audit
report
nowincludes a
negative
evaluation of A’s
performance and
he is responsible
for the reliability
of thereport. In
case of any
litigation he
would be solely
responsible for the
consequences
and both
thenegative
evaluation and
legal issue could
jeopardize his
position at the
firm. The second
optionentails that
Mr. A reports this
situation to a
partner,
the benefit of this
plan would be
that theoriginal
audit report is
issued and action
is taken to ensure
that code of ethics
is strictly
followedin future.
The disadvantage
of this option
could cause the
client company to
cancel its
accountwith the
firm. If A is
pushed hard
to amend the
report or do
nothing about it
he can go to
thePublic
Company
Accounting
Oversight Board
which was
established with
the enactment of
theSarbanes
Oxley Act.
Provisions have
been made in the
act to protect
whistleblowers
and it has been
clarified any
retribution
towards
whistleblowers
will not be
accepted
(Kleckner &
Jackson,2004).
Conclusion
From the analysis
of the whole
case and the
ethical issues
involved the
viable option
isthat Mr. A
report this matter
to a partner
counselor as this
option is more
beneficial for his
career and the
profession of
auditing also
demands that code
of ethics be
followed and
financialinformati
on be disclosed
appropriately in a
transparent
manner.
Personally A is
also veryinclined
towards the code
of ethics and
morality as he
thoroughly
studied the
code of AICPA
for his CPA exam.
If the last option
does not work he
can eventually go
to the Public
CompanyAccount
ing Oversight
Board.
 

16
Reference List
Biegelman, M., &
Bartow, T. (2006).
 Executive
Roadmap to
Fraud Prevention
and
Internal Controls:
Creating a
Culture of
Compliance.
Wiley.Coenen, T.
(2008).
 Essential of
Corporate Fraud.
Wiley.Ferrell, O.,
Fraedrich, J., &
Ferrell, L. (2000).
 Business Ethics.
Houghton Mifflin
Company .Jones,
M. (2009).
Creative
Accounting, Fraud
and International
Accounting
Scandals.
JohnWiley and
Sons.Kleckner, P.,
& Jackson, C.
(2004, June).
Sarbanes-Oxley
and Whistle-
blower
Protections
.Retrieved May
20, 2009, from
nysscpa.org:http://
www.nysscpa.org/
cpajournal/2004/6
04/perspectives/p
14.htmSarbanes
Oxley. (2006).
Sarbanes-Oxley
Compliance
. Retrieved
December 11,
2009,
fromSoxlaw.com:
http://www.soxla
w.com/Singelton,
T., & Bologna, J.
(2006).
 Fraud Auditing
and Forensic
Accounting.
Wiley.U.S
Congress. (2002).
Sarbanes Oxley
Act 2002.
Washington: U.S
Congress.Wells, J.
(2007).
Corporate Fraud
Handbook.
Wiley.
 

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