Question

Question: Please Identify relevant ethical issues presented by consulting AICPA Code of Professional Conduct. In your memo response, please site specific sections from the Code of Conduct that you used to resolve the dilemma,and please show me how a professional memo of this nature, should be written.

Case Study 4: How much to disclose to the finance director

Outline of the case

You are a qualified accountant in practice, and you lead a team providing management consultancy services. In recent years your practice has undertaken several assignments on manufacturing efficiency improvements for a medium-sized, quoted group of companies. It operates through a number of divisions, but line responsibility appears complicated, and so significant control rests with four semi-autonomous regional directors. The authority of these directors ts enhanced by their seats on the group's main board.

You have cultivated a good working relationship with the regional director with whom you are in contact most frequently. Three weeks ago that regional director asked you to investigate, as a matter of urgency, a particular project, Project A. He had been Irritated to be told, informally, of the likefy deferral of the agreed delivery date for the components on this sophisticated design-and-build contract. Project A comes within the regional director's responsibility primarily because of the location of the factory that makes the key components.

Once on site, your team had discovered a range of difficulties with the project, starting with fundamental design faults and extending deep into the manufacturing processes. It is clear that various contracts will be breached, and litigation is likely to follow. Your team has produced a prioritised list of actions and begun working to establish a revised schedule to take the project to completion.

At a recent meeting, you gave the regional director and the factory manager your estimate that the delay to Project A will be a minimum of three months. You indicated that extra direct costs are likely to be17 million to PO million. This is before any potential claims for compensation.

On the instructions of the regional director, your team has been working on a formal report specifying detailed recommendations. While still incomplete, the report appears certain to support your previous estimates.

You are aware, from the financial press, that the group is rumoured to have difficulties with its bankers. You assume that the situation with Project A is likely to be seriously detrimental to the group's financial position.

One week before the final version of the report is due, you receive a surprise telephone call from the group's finance director. He explains that he is about to enter a main board meeting, but needs to know a date for delivery of the report on Project A. Late the previous evening, the regional director had informed the finance director that your firm had been asked to provide the report. He says:

"l appreciate that you have only just started, so there are no reliable estimates yet. But the regional director mentioned that Project A could incur around$4 million to#5 million In extra costs, with income delayed by perhaps six to eight weeks. The regional director has sent his apologies to the board meeting, as he has to attend a family funeral."

He adds:

"Hopefully, the regional director is being cautious, but if something does tum out to be as wrong with Project A as those numbers suggest, the extra costs and deferred income have serious implications for the group's cash flow. The full board will need to start planning remediat action now. When will your report be ready?"

Key fundamental principles

Integrity: How do you maintain your professional integrity: by responding only to the question asked or by immediately alerting the finance director and the main board to the seriousness of the situation?

Objectivity: Does loyalty to the regional director, from whom your firm usually takes instructions, outweigh your responsibility to the main board? If not, can you resist any feeling of intimidation from the regional director that you may be experiencing?

Confidentiality: Confidentiality is fundamental to the assignment as a whole. But to whom Is the duty of confidentiality owed?

Professional behaviour: The information you have could assist the main board significantly with the discharge of its duties. Whether you disclose the information now or restrict the information you provide pending a discussion with the regional director, how can you protect your reputation and that ofyour firm?

Question: Please Identify relevant ethical issues presented by consulting AICPA Code of Professional Conduct. In your memo response, please site specific sections from the Code of Conduct that you used to resolve the dilemma.

Answer 1

This case examines ethics problems concerning the misrepresentation of data in mortgage collateral certifications. These disorders are faced via an employee and a minority shareholder, each of whom are certified public accountants (CPAs). The case requires that scholars appreciate an moral problem, evaluation substitute publications of motion, and make a choice. The case additionally requires interpretation of the American Institute of certified Public Accountants (AICPA) code of conduct and other official requisites. The interpretation of the AICPA code is primarily challenging for students seeing that they must examine how the code applies to a CPA who just isn't an employee of the corporation and now not in public practice.

For the reason that the organization conducts a component to its trade in the international atmosphere, the case can comfortably be modified for use in protection of worldwide ethics specifications centered with the aid of corporations such because the Canadian Institute of Chartered Accountants and the certified normal Accountants association of Canada.

The case is applicable for use in each undergraduate or graduate accounting courses and MBA lessons. If the case is used early within the curriculum earlier than students had been uncovered to ethical reasoning units, the applying of moral selection models will have to be omitted from the training pursuits.

The case is best to be used as a direction embedded assessment of student finding out objectives. Instructing Notes incorporate significant thinking, moral reasoning, and written communications evaluation rubrics.