Report on Ethical Dilemmas in Auditing and Finance Case Studies

This report provides a comprehensive analysis of three ethical case studies relevant to the field of finance and auditing. The first case, "Locker Room Talk," explores the ethical dilemma faced by a CPA firm partner who uncovers discrepancies between a client's financial plan and loan information during an audit, raising questions of confidentiality and professional responsibility. The second case, "Opinion Shopping," examines the pressure on auditors to compromise findings due to conflicts of interest and potential loss of business, highlighting the importance of auditor independence. The third case, "Tax Return Complications," delves into the ethical considerations when preparing tax returns for clients, particularly when faced with potential tax evasion and pressure to overlook irregularities. Each case study is analyzed to identify the key ethical issues, potential consequences, and appropriate courses of action, offering valuable insights for finance professionals.

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Table of Contents
ETHICS CASE Locker Room Talk.........................................................................................................3
ETHICS CASE Opinion Shopping........................................................................................................4
ETHICS CASE Tax Return Complications............................................................................................5
References.......................................................................................................................................6
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ETHICS CASE Locker Room Talk
This case study is primarily focusing the issue of Locker room talk when a person
naming Mr. Gable, who is engaged as a partner by a CPA firm. The primary area of his
work is providing services as a personal financial planner apart annual audit of the large
sector banks.
During providing his services as a personal financial planner to a couple naming Larry and
Susan Wilson, he became aware of the fact that the couple are planning for the divorce in
near future. This personal financial plan is about to complete and already has taken six
months for its preparation during which he gave the simultaneous service to a bank too in
relation to its annual audit.
During the audit of the aforesaid Bank when few of the personal loan files were randomly
selected by him for audit, he found the file of Mr. Larry Wilson and discovered that there
were certain mismatches noticed between what he knew from his persona engagement file
and the facts represented by the file from the Bank. He then discussed this fact with the loan
officer, who too revealed certain personal facts about the couple and requested that it should
be considered as a locker room talk and not to be discussed with anyone else (Wendt, 2018).
Now Mr. Gable is in professional dilemma as his remuneration from the CPA firm is based
on the bill raised for his services provided to the client and if he resigns from the firm from
the services to be provided to Mr. Wilson and Mrs. then he must lose his bonus which he
needs to fund his daughter’s education.
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ETHICS CASE Opinion Shopping
This case study is based on the key audit findings as noticed by the auditor representing his
from naming Paige and Gentry, but he was being prevented to disclose the same by one of the
key managerial personnel, the CFO of the group.
The major reason behind preventing the auditor is that the firm is facing the tough time and
the CFO has personally negotiated with the company for his salary/bonus package in lieu of a
promise to provide financial benefit to the company. Hence the key audit findings as revelled
by the auditor are in form of obsolete inventory management, warranty problems associated
with a machine that seems to be too costly and the CFO wanted to spread its impact for next
three years (YUAN, 2018).
The auditor has considered the inventory management problem as quite material one, but as
the CFO is not ready to accept it and they had entered some harsh arguments which the CFO
conveyed to the president of the client firm of the audit.
As the CFO and the president are in a position of undue advantage, hence they are planning
to replace the audit firm and calling for the new tendering for this process so that the new
audit firm may be entrusted with this responsibility. The major argument given by the two
key managerial personnel of the company is that as their firm is paying quite a handsome
package in form of audit fee to the present firm, hence big audit firms too may easily be
interested to work with their firm.
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ETHICS CASE Tax Return Complications
In the given case we see that Bill Adams have been given the responsibility of
preparing the tax return for a very important client for the firm he is working for and as he
went on to build relationship with the client, the client Dan, the Chief Executive Officer of
Zentor Inc, asked Bill to prepare return for his brother Dr. Rim also. It was found that in case
of Rim, had a large share of revenue but his taxable income was very low, and he had
deducted unreasonable expenses, when Bill questioned that it was told that these expenses
were reasonable and if pestered a lot he would complain to his brother. In this case Bill, even
though he might lose his important client should report this tax evasion that is done by Rim
and not give in to his pressure (Abdullah & Said, 2017). On ethical grounds he should make
sure that clients do not indulge in unnecessary hoarding of taxes. Also, it was seen that a case
of reassessment came in for Zentor Inc and Bill was asked to sign the notice of objection and
process it without checking what was the issue involved, in this case also Bill should refuse
to do this and make sure that reassessment is properly checked and then signed (Norberg,
2018).
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References
Abdullah, W., & Said, R. (2017). Religious, Educational Background and Corporate Crime
Tolerance by Accounting Professionals. State-of-the-Art Theories and Empirical
Evidence, 3(1), 129-149.
Norberg, P. (2018). Bankers Bashing Back: Amoral CSR Justifications. Journal of Business
Ethics, 147(2), 401-418.
Wendt, K. (2018). Positive Impact Investing: A Sustainable Bridge between Strategy,
Innovation, Change and Learning (first ed.). Switzerland: Springer.
YUAN, T. (2018). The Prospect for RMB Becoming One of the Two Center Currencies of
the Dual-Center Global Financial System. The Dual-Center Global Financial
System(1), 83-91.
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