Question

Case study

Fatima Hassan is responsible for the collection, and auditing services of clients' accounts for the Doha Audit Office. Has been commissioned With a new client, Al Wajba Consulting Services Company, which contracted with the Doha Audit Office recently. Company CEO It is Mr. Ali Mahmoud, who monitors all operating activities of the company and takes all major decisions. Never use this company Previously, any services from the audit office. In addition to preparing the financial statements, the Doha Audit Office will handle the related matters Company taxes.

On her first visit to the company, Fatima Hassan met Hala Abdullah, she was recently hired as an accountant and is still a student. Accounting last year at a local university. At a later meeting, Hala assured Fatma that she had found the job at the beginning of the class Scholastic after extensive research. She needs money to help fund her studies at university and feels lucky to have found A well-paid job during this current phase of the economic downturn due to the COVID-19 pandemic.

Hala felt that Fatima was someone she could talk to and get advice from. Hala spoke of a situation she had in mind Some time ago. Hala concerns dealing with sales revenue. When the proceeds from sales are collected and deposited on a weekly basis, the necessary report is filled out with the most accurate categories of payment: cash, checks or credit cards. Distance Depositing the total amount on a weekly basis, Mr. Ali Mahmoud prepares a report after adjusting the total amount deposited by His own vision. After looking at some of the weekly deposits, Hala noticed that 20,000 Qatari cash were missing from each Deposit process.

After a more comprehensive examination of the monthly tax documents that Mr. Ali filled out, Hala notes that the total income is the monthly amount reported to the Tax Authority is QR 80,000 less than the amount actually calculated. Professor Ali He is the only person to deal with the funds after they have been pooled. It is also the only person who deposits money on a weekly basis. When Hala asked Mr. Ali about the non-reporting of these unreported revenues, Mr. Ali replied that it was being done for tax purposes. It is believed that the auditor will accept this procedure because the fees of the Doha Audit Office are to implement Audit tasks and other tax services are paid by Al Wajba Consulting Services.

Study requirements:

Each student must answer the following questions but each question should be answered at least 120 word for each question:

1. What is the problem or ethical problems in this situation? And why is each of them an ethical problem?

2. Who are the affected stakeholders in this situation? Explain how.

3. What are the alternatives available to Hala Abdullah, Fatima Hassan, and Professor Ali Mahmoud?

4. For each alternative dealt with in Requirement (3), are the net benefits exceeding the net losses for all the owners? Discuss your interpretation clearly

5. Whose rights will be violated in every alternative dealt with in Question 3? Discuss your interpretation clearly

Answer 1

1. The etical problem in this situation is that Mr. Ali has been ommitting financial records for the purpose of reducing taxes paid. It is a breach of accounting ethics and is legally punishable. As tax expenses are being taken care by Al Wajba Consulting services, under reporting of revenue would be considered as misappropriation of funds. Morover the act of evading tax shows the lack of integrity on the part of Mr.Ali. Also reducing QR 20000 on each deposit is embazzlement. Being part of the auditing team Mr. Fatma should not entertain such malpractices and it was correct on the part of Ms.Hala to have reported this (act of whistle-blowing).

2. The parties affected by this incident are:

• The authorised financial signatory of the company as these are the person(s) who sign the official financial documents for the organisation and approve of the same as factually accurate.
• The company, as an accounting fraud, if uncovered, would be destructive to the company's image
• Mr. Ali, CEO of the organisation, who is responsible for collections as he is the instigator of this issue.
• Ms. Hala who might have been implicated as party to the fraud had she not reported this.
• Mr Fatma who is the signing auditor and should not be party to fraud as part of his professional expectations.
• Doha Audit services being the audit partner.

3. The alternatives available for

1. Ms.Hala - As a first , she should document all her findings well to protect herself from being wrongly accused of party to fraud. She could then bring it to the notice of Board of Directors of the company.
2. Mr. Ali - should disclose the misappropriated funds and pay-up the tax expenses. He should disclose the issue to the auditor via management representation.
3. Mr. Fatma - should disclose the findings in the audit report and should not approve the financials

4. Benefits over costs for :

1. Mr. Ali - might lose his job and reputation but would definitely avoid legal ramifications and punishments. The company would save up on legal charges and would avoid paying tax penalty, interest.
2. Mr. Fatma - would avoid the professional misconduct ramifications
3. Mr. Hala -would avoid being implicated as party to the fraud.