Written Unit 2 - n/a PDF

Preview

Summary

n/a...

Description

Operations Management BUS 5116 Crystal Lupo

Case Study

Ethics is based on well-founded standards of right and wrong that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues. It is unlike moral, which is an opinion on values, a set of impositions to force people into supporting values and standards (Velazquez et al., n.d.). Business ethics is, on the other hand, the core element of ethical philosophy related to the concept of ethics in business activities, institutions, and organizations (Universal Class, n.d.). A conflict of interest (COI) is an ethical challenge that occurs when an individual or organization is involved in multiple interests that are at odds with one another (Introduction to Business, n.d.). It can happen when someone puts his personal interest above the company’s interest that he worked for. An organization should elaborate laws and regulations to ensure its sustainability to prevent any types of interest conflict.

Brief description of the case This case describes a situation where three parties were engaged in a COI situation related to a loan request. It is about Jennifer that owned an auditing firm and paid to audit working papers for Coshocton National Bank (CNB). One of her previous clients “Fantastic Developments had submitted its financial statements for a loan that has been previously selected, while Fantastic Development had not responded to any confirmation yet by the bank. Jennifer has discovered that the financial situation of Fantastic Development had changed through the numbers provided in its financial statements. She knew that the company had been struggling financially while serving as the audit senior on the prior-year audit of Fantastic Development. When she discovered the suspicion of falsifying numbers, she contacted the Fantastic’s CFO, Tom Ward, and inquired about the company’s apparently miraculous turnaround. However, the CEO reacted rudely by saying that the business had picked up and had decided to engage another CPA firm for its accounting and auditing needs.

Articulates overarching ethical issues including the extent of Jennifer's responsibility to take action

There are particularly three overarching ethical issues related to this case. Firstly, Tom Ward provided unaudited financial statements that didn’t suspiciously reflect the situation of the company. Indeed, according to Jennifer’s past experiences with Fantastic Development, she supposed that the numbers provided are wrong. Fantastic Development was committing fraud by providing false numbers to deceive investors or lenders into believing that they are more profitable than they are. Indeed, according to Oster (2019), the most fundamental or essential ethical issues that businesses must face are integrity and trust. A business must maintain accurate bookkeeping practices to avoid any unethical repercussions. Indeed, each small or big enterprise should maintain and publish accurate financial records to pay appropriate taxes and profit-sharing to employees and shareholders (Twin, 2021).

The second ethical issue related to this case is the fact that Jennifer contacted the CEO of Fantastic development to inquire about the sudden financial changes in the company. Generally, clients of CPA firms impose confidentiality agreements as a precondition to engaging the firm to perform professional services. Indeed, using the information obtained from one client for an audit of another client is contrary to the principle of confidentiality. So, even if Fantastic Development has provided false information in its financial statements, Jennifer shouldn’t have called the CEO to inquire about the sudden change of the company. Indeed, she should have been avoiding using any specific information which she gained during her previous audit activity. The last ethical issue about this case happened when employees of CBD had previously selected FD confirmation even if Fantastic Development had not responded to either the initial or second confirmation. In fact, in the working papers related to loan valuation, Jennifer saw that the commercial loan of Fantastic Developments had been randomly selected for confirmation but that Fantastic had not responded to either the initial or second confirmation.

Recommends a specific action Jennifer should take Auditing Fantastic Development’s financial statements are inevitable for Jennifer, as she was employed by CBN to conduct such an analysis. She should overcome the ethical dilemma of violating the confidentiality of Fantastic Development and consider ethical guidelines to accounting professionals to conduct the analysis. Indeed, these guidelines would help her to show integrity and professional judgment. Also, she must avoid using any specific information which she gained during her audit activity at FD. However, she can use actual information and make sure to conduct the analysis with professionalism and try to show evidence of fraud. Her responsibilities are to act as an overall ethical issue, which includes whether she should utilize information she has previous knowledge of from her earlier audit during her current assignment or not. Besides that, she had the obligation to report to the bank about Fantastic Development's fraudulent reporting, but her facts need to be based on actual facts and numbers and certainty not on the information she previously knew about the FD. Jennifer must balance the interest of all stakeholders and consider ethical behavior related to each stakeholder and perform her duties according to the procedures and principles established and not by personal emotions and previous information.

Conclusion Making good ethical decisions require considering the ethical aspects of decisions and weighing the considerations that should impact choices. In conclusion, from this case study, we can see that the issue of ethics is highly critical and can severely impact organizations. In fact, CPA’s are expected and required by law to be highly ethical in their roles and understand the implications of immoral behavior.

References Introduction to business. (n.d.). Introduction https://courses.lumenlearning.com/wm-introductiontobusiness/

to

business.

Oster, K.V. (2019). List of Ethical Issues in Business. https://smallbusiness.chron.com/list-ethical-issues-business-55223.html

Lumen.

SmallBusiness.

Twin, A. (2021). Business Ethics. Investopedia. https://www.investopedia.com/terms/b/business-ethics.asp Velasquez, M., Andre, C., Shanks, T.S.J., Meyer, M.J. (n.d.). What is Ethics?. Markkula Center for applied Ethics. https://www.scu.edu/ethics/ethics-resources/ethical-decision-making/what-isethics/ Universal Class. (n.d.). Your Legal and Ethical Responsibilities as a Manager in the Workplace. https://www.universalclass.com/articles/business/your-legal-and-ethical-responsibilities-as-amanager.htm#:~:text=As%20a%20manager%2C%20it%20is,with%20the%20practice%20of %20ethics....