Question

Ethical dilemmas have always surrounded businesses. For example, Jeffrey is a Senior Auditor working for a large commercial bank. He just realized Bob, the company’s vice president of marketing, has been using his expense account to purchase salacious materials online using his office computer; in addition, there are hotel bills charged to the account that cannot be explained by travel receipts. Jeffrey suspects the VP is having an affair with someone in the company. Jeffery is a CPA and the company where he works is publically traded. The CPA code-of-ethics and company policy requires Jeffrey to report the violation. Nevertheless, Bob is Jeffrey’s first cousin! Reporting the violation could destroy relations between Jeffrey’s mother and his aunt, Bob’s mother. What can Jeffrey do as a senior auditor to set the ethical standards in the company that he is working in? Which of the ethical theories best explains Jeffrey’s moral dilemma? How can one of the six theories you learned about in this chapter help Jeffrey to justify whistle blowing or help him to rationalize not whistle blowing?

Answer 1

As Jeffrey is an auditor (senior or not), he needs to follow the ethical standards set by the organisation and report all violations. As a senior member of the auditing team, it is even more imperative that he set a clear example in following ethical standards so that others/juniors learn to follow the same. Reporting the violation could result in a personal negative consequence in this case, however it is still Jeffrey's role as CPA and auditor in the firm to follow all the rules and not just the easy ones. Bob has taken advantage of his high position and possibly the fact that Jeffrey is a senior auditor who can turn a blind eye, and has sought to defraud the company in monetary terms by submitting incomplete or excessive receipts and using company funds and equipment for personal and illegal use (assuming content downloaded is illegal). As the company is publicly traded as well, any fraudulent activities such a wrong payouts or illegal and unethical activities such as downloading objectionable content onto the work computer, could result in severe consequences for the firm.

Jeffrey is conflicted about what to do due to the Virtue ethical theory. The virtue theory requires that you judge people based on their character and not their actions. By this theory, Jeffrey can argue that Bob is not a bad person and a good cousin and so should not be punished for his actions. However by the Deontology theory, people should consider their actions when performing their duties. By this theory, Bob should have known better than to use the work computer to download unsuitable content, and also bill the company for the hotel room used for personal benefit. As an auditor Jeffrey will likely ascribe to the Deontology theory more, as he will expect all employees to act ethically in the performance of their duties.

Using the Deontology theory, Jeffrey should report Bob to the organisation as Bob did not act ethically when he should have. Bob's actions were clearly unethical - having an affair while married, downloading illegal content. However, if these had not included the organisation where Bob worked, then Jeffrey could have indeed turned a blind eye to the personally unethical but not professionally unethical activities. However, as Bob went ahead and used company property for personal use, and tried to obtain money from the company for personal usages of the hotel; Jeffrey as an auditor should follow the Deontology theory to review the situation, identify the violations and then report those violations to the organisation. This can be the only ethical course of action for Jeffrey, as not doing so will lead to his own ethical violations of his CPA code and his contract with the company.