When Is Resignation Not Enough—an Ethical Dilemma

Topics: Ethics, Business ethics, Accountant Pages: 11 (3887 words) Published: November 10, 2010
When is Resignation not Enough—An Ethical Dilemma


The case “When is Resignation not Enough” details an ethical dilemma encountered by Page Nolan. She left Smith, Jones, & Brown (SJB) CPA firm in 1989, to go into private business. Anonymous Company (AC) hired Page as a controller. Page’s job requirements were to ensure accounting books of interrelated business were correct, income and expenses were properly recorded and assigned, and government requirements were met. Anonymous Company is owned in part or in full by the Green Family and comprised of twenty interrelated small businesses. AC was a client of SJB, and Ms. Nolan previously worked on projects for AC. At SJB, Ms. Nolan was involved with the review that was designed to ensure the government guidelines were adhered to by AC. At that time, all guidelines were met and no problems were found. Depending on the family member’s business operation/segment, each business was involved in various stages of a project and funds flowed from segment to segment. Anonymous Company’s projects involved government financing. Government financing agency restricted the profit percentage on each project. While employed at AC, Ms. Nolan discovered checks were made payable to an outside consultant and billed to the government work. The checks were then endorsed over and deposited into Schedule C unit of the business account. Deposits of approximately $225,000 were recorded on AC’s books as donated capital. Bank required second signatures on two of every fifty (4%) checks. The secretary of the business unit C was forging the signature of the consultant on the checks. The outside consultant was paid by the firm; however, Ms. Nolan was instructed not to send the consultant a 1099 form. Schedule C unit of the business was very volatile and profits for this unit were over $4,000,000. When asked by Ms. Nolan, the family member/unit manager admitted to adding the consultant fees to the government project costs. Ms. Nolan approached the family member whose unit was improperly receiving the funds and was referred to the family member with the “greatest authority” and political clout. The family member justified the action as being necessary for survival. The person also stated that any problem would be dealt with when it occurred. Ms. Nolan insisted on the funds to be recorded as income. The activity was not revealed to the government agency. Expecting advice, Ms. Nolan spoke with a partner of SJB and warned them of the risk associated with having AC as a client. The partner resented the visit and assumed Ms. Nolan was looking for employment or some sort of a reward. Ms. Nolan was concerned about the breach of confidentiality. Assumed that nothing would be done if violation was revealed, Ms. Nolan approached the community member and stated the procedures were not appropriate and they would not continue under her tenure as a controller. The community member indirectly told Ms. Nolan to resign.


The Anonymous Company faces several operational and behavioral issues. The twenty small businesses are owned and operated by the Green family members. These business units are interrelated making it impossible to be independent of each other. It is risky for Anonymous Company to utilize parts of each business to accomplish different stages of a project. A culture of mixing business and personal issues has developed at AC. It is dependent on the various units of the business as well as its family member. The lack of internal controls exposes AC to various types of risks. It allowed the secretary of the company to forge the consultant’s signature on the checks and make deposits into the most volatile of the business units’ account. Furthermore, AC instructed Page Nolan not to send 1099 to the consultant. It is quite clear that Anonymous Company has ineffective control environment due to negligent management’s role, and communication. The company does not have a clear...

References: Albrecht, W.S, Albrecht, C.C., Albrecht, C.O. & Zimbelman, M.F. (2009). Fraud
Examination (3rd. ed.). Mason, Oh: South-Western Cengage Learning
Duska, R.F. & Duska, B.S. (2007). Accounting Ethics: Foundations of Business Ethics.
Malden, MA: Blackwell Publishing.
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Ethical Dilemma: Child Bride Research Paper
  • Essay about Analysis of an Ethical Dilemma
  • Essay about Ethical Dilemma
  • Essay about ethical dilemma
  • Ethical Dilemma Essay
  • Ethical Dilemma Essay
  • Ethical Dilemma Essay
  • Ethical Dilemma Essay

Become a StudyMode Member

Sign Up - It's Free