SIMBALA, Andi Te’a Mari O.

(2204965)

BS Accountancy – 2

AE 231 – 1232

Reaction Paper on the Ethical Dilemmas CPAs Commonly Encounter

Certified Public Accountants are not immune to ethical and legal dilemmas. They can arise at
any time and are difficult to manage. For example, CPAs commonly encounter ethical dilemmas
involving confidentiality agreements, conflicts of interest, two-party transactions, and pro-bono work.
My chosen ethical dilemma is ethical dilemma 1 in the article entitled “ICYMI | Ethical Dilemmas Facing
CPAs: Three Case Studies.”

Ethical Dilemma 1 is about John and Jane Doe getting a divorce. Their CPA is Andre which is
John’s longtime CPA and friend. In this dilemma, Andre did not request that they sign a conflict-of-
interest waiver since both parties agreed to settle their divorce amicably. However, after months of
negotiations, their once amiable situation started to deteriorate slowly. John wanted Andre to take his
side over Jane’s. This situation creates Andre’s ethical dilemma of conflict of interest and two-party
transactions.

In the case of two-party transactions, CPAs will be asked to assist with two-party transactions
such as divorcing couples or business partners going separate ways. In such cases, CPAs can offer
preferential treatment, which is problematic. For CPAs to mitigate some of the risks that two-party
transactions have, they must have proper disclosure forms and conflict of interest waivers when
working in such transaction you must be protected before legal issues arise.

Another ethical dilemma that Andre faced is the conflict of interest. Conflict of interest is one of
the most ethical dilemmas for CPAs. In the case of Andre, he has a personal relationship with the client
for whom he is doing the work. The best protocol for such cases is to avoid clients with whom you have
a personal connection and allow other CPAs to complete the job.

In the case of Andre, he must treat John and Jane equally, regardless of any prior assets, who
has more assets, or who is paying for his professional fee. CPAs should always keep their professional
relationships separate from their relationship during business with their clients. However, this problem
would not even exist if Andre did not accept this setup since it is rarely advisable for a CPA to enter an
arrangement. If so, he should have informed both parties of the potential ramifications and potential for
a conflict of interest.

This shows that CPAs are not immune to ethical dilemmas as they can arise at any time. And as
for future accountants, we are subject to several professional liabilities that impact how our clients and
others perceive our services. In addition, it is crucial for CPAs that the public’s expectations for a CPA’s
responsibilities have risen significantly, so we should be cautious of the risks and work we do.

Article:

https://www.cpajournal.com/2017/10/12/icymi-ethical-dilemmas-facing-cpas-three-case-studies/