Solving Ethical Dilemmas

Topics: Ethics, Decision making, Business ethics Pages: 6 (1595 words) Published: January 21, 2011
Solving Ethical Dilemmas in the Accounting Profession

LaKeesha Lawler

ACC/260

January 14, 2011

Dan Jensen

Solving Ethical Dilemmas in the Accounting Profession

The Dilemma of an Accountant

Baker Greenleaf was one of the Big Eight accounting firms. Daniel Potter was a highly ethical accountant that placed a lot of value on integrity. He was hired to work as an accountant for the firm. Baker like many other firms was faced with a dilemma that tested the firm’s ethical standings. Even though a firm may be faced with a difficult decision, the firm’s ethical standing helps determine the best ethical decision for each situation. To reach the best ethical decision it is best to use philosophical approaches in addition to the stakeholder impact analysis.

Firms face dilemmas daily, which is why it is essential that employees have a fair understanding of ethics and how they apply to business. The study of ethics involves the approaches of principles or standards, which are used in businesses during the decision-making process (Decision-Making-Solutions, 2008).

The use of philosophical approaches and the stakeholders impact analysis helps to focus on the impact the decisions will have on the stakeholders, which help to ensure that the attention is not solely focused on profits but ethical aspects as well. Some businesses concentrate on the amount of profit whereas a business that implements ethics focuses on not only the amount of profit but also how that profit was achieved (Businessballs, 2006-2010). A business just as concerned about how the profit is generated as it is about the amount of profit is more likely to make better ethical decisions concerning the business, stakeholders, and public interest.

The Dilemma

The Firm, Baker Greenleaf, was faced with a dilemma when the firm realized that an account that it previously shared with another Big Eight accounting firm was facing a situation that needed a special audit (Brooks, 2007). Baker was interested in performing this audit in hopes of gaining the account exclusively. Baker placed this account as a high priority placing its best employees on the account.

The account in question was a wholly owned real estate subsidiary (SUB) that had caused the firm problems in the past (Brooks, 2007). Oliver the project senior put Dan in charge of handling the SUB’s audit by reaching a clean opinion. Upon completing the audit, Dan reached several issues of concern, which he managed to correct except for one.

The Sub overstated one of its largest properties on its balance sheet. The overstatement was substantial and Dan believed the problem needed to be corrected. The balance sheet valued the property at a much higher amount than Dan’s estimation. This posed as an issue that Dan believed the issue needed to be addressed with the SUB managers because he recommended a write-down to correct the miscalculations. The SUB managers refused the write down, which presented a dilemma for Dan because according to AICPA regulations on materiality, disagreements amongst the client and accountant affecting the income statement greater than three percent is required to be disclosed in the CPA’s opinion (Brooks, 2007). The client’s balance sheet presented an overstatement resulting in a $1,900,000 write-down, which would present a seven percent difference in the client’s net income.

Dan had no choice but to send his report and recommendations to Oliver, which then presented another dilemma. Oliver did not agree with Dan’s suggestions and he wanted Dan to adjust his report to eliminate his findings. When Dan refused Oliver decided to switch the reports in addition to writing Dan up. Dan faced two dilemmas, creating a write-down to correct the overstatement and reporting Oliver actions of falsifying his report.

Stakeholders Involved

Several parties are involved in this situation and stand to be affected in one way or another. Dan is an employee of Baker...

References: Brooks, L. J. (2007). Business & professional ethics for directors, executives, & accountants (4th ed.). Mason, OH: Thomson Southwestern.
Businessballs. (2006-2010). Ethical leadership, decision-making, and organizations. Retrieved from http://www.businessballs.com/ethical_management_leadership.htm.
Decision-Making-Solutions. (2008). Addressing ethics in decision making. Retrieved from http://www.decision-making-solutions.com/ethics_in_decision_making.html.
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