Ethics Case Dilemma

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Dilemma of an Accountant
In 1976 Senator Lee Metcalf (D-Mont.) released a
report on the public accounting industry which
rocked the profession. Despite a decade of revisions
in rules and regulations (variously established by the
Securities and Exchange Commission, Accounting
Principles Board, and Financial Accounting Standards
Board), public accounting firms were still perceived
by many on Capitol Hill as biased in favor of their
clients, incapable of or unwilling to police themselves,
and at times participants in coverups of
client affairs. Senator Metcalf even went so far as to
suggest nationalizing the industry in light of these
Just prior to the Metcalf report, Daniel Potter
began working as a staff accountant for Baker
Greenleaf, one of the Big Eight accounting firms. In
preparation for his CPA examination, Dan had rigorously
studied the code of ethics of the American
Institute of Certified Public Accountants (AICPA)
and had thoroughly familiarized himself with his
profession’s guidelines for morality. He was aware of
ethical situations which might pose practical problems,
such as maintaining independence from the
client or bearing the responsibility for reporting a
client’s unlawful or unreasonably misleading activities,
and he knew the channels through which a CPA
was expected to resolve unethical business policies.
Dan had taken the guidelines very seriously; they
were not only an integral part of the auditing exam,
they also expressed to him the fundamental dignity
every independent auditor was obligated to maintain
and calling of the profession—namely, to help sustain
the system of checks and balances on which capitalism
has been based. Daniel Potter firmly believed
that every independent auditor was obligated to
maintain professional integrity, if what he believed
to be the best economic system in the world was to
Thus, when Senator Metcalf’s report was
released, Dan was very interested in discussing it
with numerous partners in the firm. They responded
thoughtfully to the study and were concerned with
the possible ramifications of Senator Metcalf’s
assessment. Dan’s discussions at this time and his
subsequent experiences during his first year and a
half at Baker Greenleaf confirmed his initial impressions
that the firm deserved its reputation for excellence
in the field.
Dan’s own career had been positive. After graduating
in economics from an Ivy League school, he
had been accepted into Acorn Business School’s
accountant training program, and was sponsored
by Baker Greenleaf. His enthusiasm and abilities
had been clear from the start, and he was rapidly
promoted through the ranks and enlisted to help
recruit undergraduates to work for the firm. In
describing his own professional ethos, Dan
endorsed the Protestant work ethic on which he had
been raised, and combined this belief with a strong
faith in his own worth and responsibility. A strong
adherent to the assumptions behind the profession’s
standards and prepared to defend them as a
part of his own self-interest, he backed up his reasoning
with an unquestioning belief in loyalty to
one’s employer and to the clients who helped support
his employer. He liked the clearcut hierarchy
of authority and promotion schedule on which
Baker Greenleaf was organized, and once had
likened his loyalty to his superior to the absolute
loyalty which St. Paul advised the slave to have
towards his earthly master “out of fear of God”
(Colossians 3:22). Thus, when he encountered the
first situation where both his boss and his client
seemed to be departing from the rules of the profession,
Dan’s moral dilemma was deep-seated and
difficult to solve.
The 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...
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