Question

Problem 2: The Promotion

You have been working for a corporation as the controller for just a year.   The CFO is moving to another state next month and you have been offered the job.

Company background: Just recently the company has decided to go public.

Your background: You have been with the company one year, a licensed CPA who spent 4 years in public accounting. Your plan was in 5 years becoming a CFO for this company or another company. The job falls in your lap in just one year. There will however be very little time for the transition with the old CFO leaving the state shortly.

You have no real background in SEC rules and regulations. When the company announced it’s plans to go public you attended a class but is that enough? As CFO you will be a key player in preparing financial information for the filing, discussion with attorneys, auditors, and underwriters. You would also be responsible for supervising other professionals, including the person who will be filling your old position.

Despite your concerns, you keep thinking about how great this would be for your career. Not to mention the sizable salary increase and job status.

The company has no intention of advertising the position outside the company unless you refuse the position.

It will be nearly impossible to take the promotion and gain the competence needed to be effective due to the fact you will be plunged right into preparations for the offerings. There will be no time. You really want this position and “Management wouldn’t offer me an executive position if they didn’t think I was capable, would they?”

Analyze the problem using the ten steps on page one. What part of the code is most relevant to this situation?

Ten Steps;

Recognizing Ethical Matters and making good decisions means being familiar with the profession’s rules and regulations from the AICPA and the state board of accountancy. To be effective, you need to know how to analyze a matter or situation. One ethics decision making model contains 10 steps:

Step 1: Recognize the Ethical Issue – the ethical issue in this situation

Step 2: Gather the Critical Facts – All the facts may not be initially evident, make sure you have them all before making any decisions.

Step 3: Identify the Stakeholders – Considering the alternatives who will positively benefit or negatively be harmed by your decision or actions.

Step 4: Consider Alternatives – What are the various approaches that can be taken to address this matter and resolve the ethical conflict.

Step 5: Consider the Effect on Stakeholders – Consider how each approach is likely to affect the stakeholder.

Step 6: Consider Your Comfort Level – How comfortable are you with each option, if discussed in public, how would it reflect on your ethics.

Step 7: Consider Rules, Regulations and Laws – Are the options consistent with the professional rules, regulations and laws?

Step 8: Make a Decision – Once you have considered all of the above can you make a decision?

Step 9: Document Your Efforts – Document your understanding of the facts, names of anyone you have consulted, their professional affiliations and your decision.

Step 10: Evaluate the Outcome – Once time has passed, it may be constructive to reevaluate the decision you made and considering the outcome, if you would have done anything differently.

Answer 1

1) the ethical issue in this situation is as current CFO of company is leaving and that company wishes to go public and is choosing a person who is controller since one year in this company who has 4 years knowledge in public accounting so issue arises as current CPA thinks will he be suitable for the CFA profile or not as has no knowledge in SEC rules and regulations.

2) critical facts

• That current controller has no knowledge in SEC rules and regulations.
• As the company wants to go public so this controller of company has previous experience of 4 years in public accounting which can help company as they are planning to go public.
• As CFO is the important responsibility so still not sure if the controller would be able to manage all aspects as he may be good in public accounting but not necessarily on hiring people for his current profile or dealing with outsiders.

3) If controller accepts the offer of being CFA than this will benefit him more than anyone else as he still lacks knowledge or experience in some domains, it will be both good and bad for company as they are going public so this can help as controller has prior 4 years experience but bad as he does not have other managerial abilities or experience and also he aimed to be CFO after 5 years

4) Other alternatives that should be considered are

• hiring people from outside after examining people if suitable for this position.
• Training could be provided by current CFA as he will be leaving company after a month so controller could work under him and understand things better till he is leaving.

5) the approaches  discussed above have both advantages and disadvantages that is hiring people from outside is time consuming and costly process and training controller in one month is also not feasible enough so it is still not sure if it is going to be successful or not so stakeholders have high risk .

6) considering the options that if controller can be trained so he will have sufficient knowledge to be CFA but time span is less and more practical experience is needed so there is no 100% proof that controller can be the best CFA but considering other option of hiring from outside whole risk will be in companies hand and controller will not be liable if something bad happens in company just in other case when he himself take the job of being CFA

7) Option of hiring person from  outside is consistent with rules and regulations but hiring controller is not consistent with the rules as he still not have best knowledge for the position.

8) I will tell the companies stakeholders about disadvantages and advantages of both situations and will ask them to make decision.

9)Not considered any other professionally as its the companies stakeholders and directors who can judge better.

10) Left the decision on companies stakeholder and directors.