Can you please help me on what is their stake in the ethics case of The Dilemma of an Accountant. And if you can give me some suggestions on what the impacted of my decision to have him turn in his boss and to file a grievence with the accoutning board.
The stakeholder that that I could identified were the Big Eight accounting firm and Baker Greenleaf.
Here is the main part of the story. Sorry it is long.
Thus, when he encountered the first situation where both his boss and his clientseemed to be departing from the rules of the profession, Dan’s moral dilemma was deep-seated and difficult to sThe new assignment began as a welcome challenge.
A long-standing and important account which Baker had always shared with another Big Eight accounting firm needed a special audit, and Baker had reason to expect that a satisfactory performanceolve. might secure it the account exclusively. Baker put its
best people on the job, and Dan was elated to be included on the special assignment team; success could lead to an important one-year promotion.
Oliver Freeman, the project senior, assigned Danto audit a wholly-owned real estate subsidiary (Sub) which had given Baker a lot of headaches in the past. “I want you to solve the problems we’re having with this Sub, and come out with a clean opinion (i.e., confirmation that the client’s statements are presented fairly) in one month. I leave it to you to do
what you think is necessary.”
For the first time Dan was allotted a subordinate, Gene had worked with
the project senior several times before on the same client's account, and he was not wholly enthusiastic
about Oliver’s supervision. “Oliver is completely inflexible about running things his own way—mostof the staff accountants hate him. He contributes a
7:00 A.M. to 9:00 P.M. day every day, and expects everyone else to do the same. You’ve really got to put
out, on his terms, to get an excellent evaluation from him.” Oliver was indeed a strict authoritarian. Several times over the next month Dan and Oliver had petty disagreements over interpretive issues, but when Dan began to realize just how stubborn
Oliver was, he regularly deferred to his superior’s opinion.
Three days before the audit was due, Dan completed his files and submitted them to Oliver for review. He had uncovered quite a few problems but
managed to solve all except one: one of the Sub’s largest real estate properties was valued on the balance
sheet at $2 million, and Dan’s own estimate of its value was no more than $100,000. The property was a run-down structure in an undesirable neighborhood, and had been unoccupied for several years. Dan discussed his proposal to write down the property by $1,900,000 with the Sub’s managers,
but since they felt there was a good prospect of renting the property shortly, they refused to write
down its value. Discussion with the client had broken off at this point, and Dan had to resolve the disagreement on his own. His courses of action were ambiguous, and depended on how he defined the income statement: according to AICPA regulations on materiality, any difference in opinion between the client and the public accountant which
affected the income statement by more than 3 percent was considered material and had to be disclosed in the CPA’s opinion. The $1,900,000 write-down
would have a 7 percent impact on the Sub’s net income, but less than 1 percent on the client’s consolidated
net income. Dan eventually decided that since the report on the Sub would be issued separately (although for the client’s internal use only), the
write-down did indeed represent a material difference in opinion.
The report which he submitted to Oliver Freemancontained a recommendation that it be filed with a
subject-to-opinion proviso, which indicated that all the financial statements were reasonable subject to
the $1.9 million adjustment disclosed in the accompanying opinion. After Freeman reviewed Dan’s files, he fired back a list of “To Do’s,” which was the
normal procedure at Baker Greenleaf. Included in the list was the following note:
1. Take out the pages in the files where you estimate the value of the real estate property at $100,000.
2. Express an opinion that the real estate properties are correctly evaluated by the Sub.
3. Remove your “subject-to-opinion” designation and substitute a “clean opinion.”
Dan immediately wrote back on the list of “To Do’s” that he would not alter his assessment since it clearly
violated his own reading of accounting regulations. That afternoon Oliver and Dan met behind closed doors.
Oliver first pointed out his own views to Dan:
1. He (Oliver) wanted no problems on this audit. With six years of experience he knew better than
Dan how to handle the situation.
2. Dan was responsible for a “clean opinion.” Any neglect of his duties would be viewed as an act of
irresponsibility.
3. Any neglect of his duties would be viewed as an act of irresponsibility.
4. The problem was not material to the Client (consolidated) and the Sub’s opinion would only be used “in house.”
5. No one read or cared about these financial statements anyway.
The exchange became more heated as Dan reassertedhis own interpretation of the write-down, which was that it was a material difference to the Sub and a
matter of importance from the standpoint of both professional integrity and legality. He posited a situation where Baker issued a clean opinion which the client subsequently used to show prospective buyers
of the property in question. Shortly thereafter the buyer might discover the real value of the property
and sue for damages. Baker, Oliver, and Dan would be liable. Both men agreed that such a scenario was
highly improbable, but Dan continued to question the ethics of issuing a clean opinion. He fully understood
the importance of this particular audit and expressed his loyalty to Baker Greenleaf and to Oliver, but nevertheless believed that, in asking him to issue knowingly a false evaluation, Freeman was transgressing the bounds of conventional loyalty.
Ultimately a false audit might not benefit Baker Greenleaf or Dan.
Freeman told Dan he was making a mountain out of a molehill and was jeopardizing the client’s account
and hence Baker Greenleaf’s welfare. Freeman also reminded Dan that his own welfare patently depended on the personal evaluation which he would
receive on this project. Dan hotly replied that he would not be threatened, and as he left the room, he
asked, “What would Senator Metcalf think?”
A few days later Dan learned that Freeman had pulled Dan’s analysis from the files and substituted a clean opinion. He also issued a negative evaluation of Daniel Potter’s performance on this audit.
Dan knew that he had the right to report the incident to his partner counselor or to the personnel
department, but was not terribly satisfied with either approach. He would have preferred to take
the issue to an independent review board within the company, but Baker Greenleaf had no such board.
However, the negative evaluation would stand, Oliver’s arrogance with his junior staff would remain unquestioned, and the files would remain with Dan’s name on them unless he raised the incident with someone.
He was not at all sure what he should do. Heknew that Oliver’s six years with Baker Greenleaf counted for a lot, and he felt a tremendous obligation to trust his superior’s judgment and perspective. He
also was aware that Oliver was inclined to stick to his own opinions. As Dan weighed the alternative,
the vision of Senator Metcalf calling for nationalization continued to haunt him.
In the given scenario of "The Dilemma of an Accountant," the stakeholder that you have identified are the Big Eight accounting firm and Baker Greenleaf.
The impact of your decision to turn in your boss and file a grievance with the accounting board can have several implications:
1. Impact on your career: Reporting your boss and filing a grievance against the accounting board may have consequences for your career within the company. Your boss may hold a negative evaluation of your performance and it could impact your chances of promotion or future opportunities within the firm.
2. Ethical considerations: By reporting the incident and taking a stand against your boss's decision to issue a clean opinion, you are upholding professional integrity and ethics in the accounting industry. Your decision will demonstrate your commitment to the principles of the profession and may lead to improving the overall ethical standards within the company.
3. Legal liability: By issuing a clean opinion and knowingly omitting the information about the overvalued property, there is a risk of potential legal liability for both the company and individuals involved. If the buyer of the property were to discover the true value and sue for damages, Baker Greenleaf, your boss, and even yourself could be held responsible.
4. Impact on the client and company reputation: Filing a grievance and reporting your boss's unethical behavior might lead to the loss of the client's account. This can harm the reputation of both Baker Greenleaf and the Big Eight firm. However, taking a stand against unethical practices can also enhance the company's reputation in the long run, as it demonstrates a commitment to ethical conduct.
Recommended actions:
1. Consult with a partner counselor or personnel department: Seek guidance from a higher authority within the company. They may help you navigate the situation and provide advice on how to address the issue properly.
2. Consider reporting the incident to an external authority: If internal mechanisms fail to resolve the issue, you may consider reporting the unethical behavior to external bodies, such as the accounting board or regulatory authorities. This can help ensure that appropriate actions are taken to address the situation.
3. Document the incident: Keep a record of all relevant conversations, emails, or any other evidence that supports your case. This documentation will be crucial if you decide to escalate the issue further.
4. Seek legal advice: If you believe there is a significant legal risk associated with the incident, it may be worthwhile to consult with a legal professional to understand your rights and potential consequences.
Remember, the decision to report such incidents is a personal one and should be based on your own assessment of the situation and the potential consequences.
In the ethics case "The Dilemma of an Accountant," there are a few stakeholders involved, namely the Big Eight accounting firm and Baker Greenleaf. Let's break down their stake in the case as well as the potential impacts of your decision to turn in your boss and file a grievance with the accounting board.
1. Big Eight accounting firm: The firm has a stake in maintaining its reputation and complying with professional ethics and standards. If the firm's employees, like Dan, encounter ethical dilemmas and handle them appropriately, it reflects positively on the firm's commitment to ethical practices. However, if the firm fails to address ethical issues, it risks damaging its reputation and facing potential legal consequences for failing to meet professional standards.
2. Baker Greenleaf: As a specific branch or department within the Big Eight accounting firm, Baker Greenleaf also has a stake in maintaining its reputation and complying with ethical standards. In this case, Oliver Freeman, the project senior, wants a clean opinion on the audit, while Dan believes that a write-down of the property is necessary. How this situation is handled will affect Baker Greenleaf's credibility and its relationship with the client involved in the audit.
Now, let's consider the potential impact of your decision to turn in your boss and file a grievance with the accounting board:
1. Impact on the boss: If you decide to turn in your boss, Oliver Freeman, for pressuring you to issue a false evaluation, it could lead to disciplinary actions against him, potentially affecting his career and reputation within the firm. It may also send a message to other employees that unethical behavior will not be tolerated.
2. Impact on your evaluation and career prospects: If you decide to file a grievance and report the incident, it could have positive or negative consequences for your career within the firm. On one hand, it demonstrates your commitment to ethical practices and integrity, which could be positively viewed by superiors and other colleagues. On the other hand, it also risks creating tension and potential retaliation from your boss, which could impact your career prospects within the firm.
3. Impact on the client relationship: Depending on how the situation is resolved, it may also impact the relationship between Baker Greenleaf and the client involved in the audit. If the client discovers that a false evaluation was issued, it could damage their trust in the firm and potentially lead to legal issues.
Ultimately, the decision to turn in your boss and file a grievance with the accounting board is a personal one. Consider the ethical implications, the potential consequences, and consult with relevant parties within the firm, such as a partner counselor or the personnel department, to understand the best course of action in this particular situation.