Engagement Letter

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Case 9: The travel expense billing controversy and the false claim act Date: September 19th 2012

1.Why would an independent audit firm, like PwC, that depends upon the maintenance of its reputation for integrity and professionalism, to retain and attract clients, risk the loss of that reputation by engaging in what appears to be unethical behaviour (not returning travel expense rebates)? Explain your answer and reasoning. According to Fleet (1991), ethics are those standards or morals a person sets for himself or herself regarding what is right or wrong. The potential for individuals and organizations to behave unethically is limitless. There are different types of unethical behaviours and this time we are referring to the unethical behaviour of PWC, by not returning travel expense rebates. There are several reasons why a company might consider acting unethically when preparing financial information. First reason that comes to mind is for self-interest. The greatest predictor of unethical behaviour is an employee’s emphasis on self-gain. It refers to the tendency to use interpersonal relationships opportunistically and have less concern about consequences for others. Greediness leads to unethical behaviour. The overemphasis on short term monetary gain can also be a reason leading to unethical behaviour in a company. According to Gellerman (1986), some common rationalizations can be used justify unethical behaviour and these are often used by companies which do not want to admit engaging in wrong practices. Such companies usually pretend the behaviour is not really unethical or illegal or they excuse the behaviour by saying it’s really in the best interest of the organization. In the case of PWC, despite it being an independent firm, the idea of making more profit might have clouded the thinking and caused them to act unethically. Unethical acts are often committed knowingly because organizations often reward violation of ethical behaviours....
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