Question

Case 2-1 A Team Player? (a GVV case)

Barbara is working on the audit of a client with a group of five other staff-level employees. After the inventory audit was completed, Diane, a member of the group, asks to meet with the other employees. She points out that she now realizes a deficiency exists in the client's inventory system whereby a small number of items were double counted. The amounts are relatively minor and the rest of the inventory observation went smoothly. Barbara suggests to Diane that they bring the matter to Jessica, the senior in charge of the engagement. Diane does not want to do it because she is the one responsible for the oversight. Three of the other four staff members agree with Diane. Haley is the only one, along with Barbara, who wants to inform Jessica.

After an extended discussion of the matter, the group votes and decides not to inform Jessica. Still, Barbara does not feel right about it. She wonders: What if Jessica finds out another way? What if the deficiency is more serious than Diane has said? What if it portends other problems with the client? She decides to raise all these issues but is rebuked by the others who remind her that the team is already behind on its work and any additional audit proce- dures would increase the time spent on the audit and make them all look incompetent. They remind Barbara that Jessica is a stickler for keeping to the budget and any overages cannot be billed to the client.

Apply Ethical decision making process and Kohlberg's model and GVV to the answers.

Questions.

1. Assume you are in Barbara's position. What steps can be taking? Consider the following in answering the question:

• How can you best express your point of view effectively?
• What do you need to say, to whom, and in what sequence?
• What do you expect the objections or pushback will be and, then, what would you say next?

Answer 1

Solution

Diane and the ones who did not want to take the matter to Jessica,the senior,are reasoning at the preconventional levels of avoiding punishment and satisfying one\'s own needs.They want to avoid having more work to do or receiving a low evaluation from missing a mistake (Diane)or going over the time budjet.Barbara and Haley are reasoning at the conventional and,possibly,postconventional levels.They want to be fair to the firm ,the client,and the public,and know that they are following audit standards(law and order).It is possible that they are reasoning at level 5,social contract.They fully understand the social contract CPAs undertake to protect the public interest in financial markets.Barbara understands that the deficiency could be more serious than the group of staff auditors understands or that the deficiency could portend other problems.It could also portend problems with internal control deficiencies over financial reporting ,which is the most cited deficiency of audit firms by the PCAOB.

Often groups want to have a clear cut leader or work by majority rule.However,ethics does not go along well with majority rule.If a group decides by majority rule to rob someone.It does not make the theft right or ethical.Barbara should tell Jessica about the deficiency