Executive Summary

This case study discusses a situation between two employees Larry, and Joe. Larry is in a tight financial
position and expects that a promotion to the supervisor position in the office would be very helpful. The
other contender for the post is his colleague Joe who is equally qualified in all respects to get the
promotion too. Larry found himself in a beneficial position which enhances his chances of getting
promoted as Joe has been shifted to other company due to some interpersonal issues portrayed by
client against Joe. In course of audit, Larry finds out the complaint against the Joe baseless and is in a
dilemma to communicate the same to his senior as it may give an equal chance to Joe to win the
promotion. This case is solved with the help of American Accounting Association model for decision
making. This model requires the facts of cases, ethical issues involved, various alternatives, prevailing
norms, and principles, and at the end decision to be taken in accordance with the norms, and principles
applicable in the country in that specific domain.

Table of Contents

Contents
Executive Summary....................................................................................................................................... 1
Table of Contents .......................................................................................................................................... 1
Introduction .................................................................................................................................................. 2
Facts of the Case ........................................................................................................................................... 2
Ethical Issues Involved .................................................................................................................................. 3
Industry Principles, Rule, and Values ............................................................................................................ 3
Alternative Options ....................................................................................................................................... 3
Best Option to Choose in Case of Following the Auditing Norms ................................................................ 3
Expected Consequences for an alternate course of Action .......................................................................... 4
The Decision to be Taken .............................................................................................................................. 4
Conclusion ..................................................................................................................................................... 4
References .................................................................................................................................................... 4
 Introduction

It is a case of the ethical dilemma in an auditing firm Sampson and Associates. The firm has two
employees; Larry, and Joe and both are equally capable in all respects. There is a vacancy for the post of
a supervisor in the firm, and both of the employees are considered for the same. Larry has married
recently and faces some financial turbulence, and on the other hand, Joe has been shifted from one
client location i.e. Tower Ltd. to another company on the pretext of an excuse which doesn’t seem
palpable. This audit has been assigned to Larry and he did his best at work and expects this work to help
him in earning the promotion. The audit manager at Tower Ltd. has communicated about the
unprofessional behavior of Mr. Joe, but as Larry been through the work done by Joe, he found it
satisfactory. It seems feasible to him that the client has misspoken about Joe to the audit manager due
to some personal issues between them. Now, this case decides step by step procedure to overcoming
and solving this issue using the American Accounting Association decision-making model.

Facts of the Case

a. Larry and Joe are professionals of similar standing employed in the same firm at a similar
profile. Henceforth, there is a strong rivalry prevailing amongst them.

b. Larry and Joe, both are eying a promotion to a profile of a Supervisor position for one
vacancy. As mentioned, Larry has recently married and his wife is supporting him in paying
the mortgage of his house. It also denotes the increase in living expenses. Resultantly, an
angle to the situation suggests the undue pressure on the finances.

c. The audit of Tower Ltd. has been earlier assigned to Joe, and later on, transferred to the
Larry. There are no obvious reasons for replacement because the reasons cited by superiors
at Sampson & Associates, and Audit Manager of the Tower Ltd could not be verified
concretely.

d. It has been realized by Larry that work performed by Joe is up to the mark, and the
allegations raised on him could either because of misinformation of the audit manager or
issues involving the interpersonal relationship between the client and Joe.

e. Also, the audit manager would not bring up the issues confided to Larry on Joe’s
mishandling and unprofessional behavior and due to completion of an audit with resolved
issues would give Larry an edge to earn a higher position.
 Ethical Issues Involved

In this case, Larry has an advantageous position as the alternative candidate for the supervisor post;
Larry has been removed from the audit of Tower Ltd possibly due to unfavorable comments from the
client. Larry has finished the audit well and faces an ethical question of informing the superiors at audit
firm about the possible miscommunication between audit manager and client of Tower Ltd. Larry could
gain the promotion if he remains quiet about the impeccable work performance of Joe and less liking of
the client. (ACCA, n.d.)

Industry Principles, Rule, and Values

As per prevailing criteria in the field of auditing, the auditor should maintain its independence while
performing the professional duties. The professional accountant should also consider keeping a
suspicious mind and remaining alert of any inkling towards mismanagements. It is very unprofessional to
take favors from clients, maybe of financial nature or otherwise, as it would lead to collusion.

Alternative Options

Mr. Larry has two options at hand; to complete the audit, along with resolving issues to be in the good
books of the client by not mentioning the possible misstatement towards the Joe, and gain the position
of the Supervisor. On the other hand, he can draw the attention of higher authority towards the issues
between Joe and the client, and share the appropriateness in the auditing methods and procedures
followed by Joe.

Best Option to Choose in Case of Following the Auditing Norms

As per the set principles of auditing, and professional norms, Larry should take the second option,
mentioned-above, and voice his experience while auditing the Tower Ltd. He should also communicate
the incorrect behavior and attitude of the client towards Joe, leading to the mistrust inculcated in the
audit manager and the higher authority of Audit Firm.
 Expected Consequences for an Alternate Course of Action

If Mr. Larry opts to avail the options # 1, he will be achieving his goal of getting a promotion and an
upper hand over his colleague, Mr. Joe. The promotion would help him a lot as it will fulfill the additional
financial stress bestowed upon him. Alternatively, if he avails the second option, there is a strong
possibility of easing out the issues between Mr. Joe, Client, and the seniors at the audit firm. It is quite
feasible that his golden chance of availing a promotion could not materialize as this information will put
both the contenders at an equal footing. And, Mr. Joe could be selected for the post of Supervisor, due
to his professional behavior. This option would hamper the plans of Larry’s financial ease.

The Decision to be Taken

To remain unbiased, and providing the recognition and promotion based on the merit of the
competitors, option – 2 should be availed. The Ethical standards and Independence of an auditor
strongly suggests the seamless and unbiased communication amongst the auditing firm. Should comply
with the requirements of the principles of auditing. The ethical requirements are mentioned in the
Choosing option #2 might support Mr. Joe’s case, but it would be right because it will straighten out the
confusion created by the client of Tower Ltd, and protecting the independence of Mr. Larry.

Conclusion

This case is a classic example of an ethical situation at work. This report describes the case of two
employees and the moral dilemma in choosing personal gains or ethical requirements demanded by the
general rules and regulations. Mr. Larry is in an advantageous position because he has finished his work
impeccably and his competitor for the work is stuck in some misunderstanding. Now, after applying the
step by step solution of the model, it is derived that Larry should communicate the personal issues
between the client and Joe, and joe is at no fault in his professional duties.

References

Bibliography
ACCA, n.d. AAA Model Ethical Decision Making. AGlobalWall.

Board, A. a. A. S. ed., 2017. Auditing Standard ASQC 1. In: Compiled Auditing Standard. Melbourne:
Auditing and Assurance Standards Board, p. 15.