Professional Liability

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“Professional Liability” Please respond to the following:

  • From the case study, determine the main potential ethical dilemmas. Next, use the seven (7) steps in the ethical decision-making framework to recommend one (1) course of action you would take in order to avoid the ethical dilemmas. Provide a rationale to support your recommendation.
  • From the case study, based on your recommendation in Part I of this discussion, suggest one (1) strategy that would support you making the right decision without undermining the manager’s confidence in your problem-solving ability in a difficult situation. Provide a rationale to support your response.

Case Study

You have worked as a staff auditor for two and one-half years and have mastered your job. You will likely be promoted to a senior position after this busy season. Your current senior was promoted about a year ago. He appreciates your competence and rarely interferes with you. As long as he can report good performance to his manager on things she wants, he is satisfied. The manager has been in her position for three years. She is focused on making sure audits run smoothly and is good at this. She is not as strong on the softer skills. Although she is approachable, her attention span can be short if what you are saying does not interest her. You are aware that she expects her teams to perform excellently during this busy season and she hopes to be promoted to senior manager as a result, bringing her closer to her goal of making partner early.

The audit engagement on which you are working has become increasingly difficult since last year’s engagement because of some complicated accounting transactions that the client made. There has also been unexpected turnover in accounting personnel at the client. This has made interacting with the client and getting the information you need in a timely manner problematic. However, the engagement time budget and the audit fee remain the same as last year’s. Further, four staff auditors are assigned to the engagement, and there are no additional staff available to transfer in to ease the workload. Your senior now tells you that the manager has requested that you, he, and the other staff auditors do an additional analysis of a potential misstatement in one of the client’s accounts. Even with your team’s current workload there is significant danger that the engagement will run “over budget.” You know that if you do the analysis thoroughly, it will further endanger meeting the time budget the manager had planned. The more time you spend on the engagement, the less profitable it will be for the audit firm, which will clearly displease the manager and her superiors.

As a group, the staff auditors discuss the situation and express their concerns regarding the perceptions that running over budget will create and the reputational issues that short-circuiting the analysis could create. When your senior stops by to discuss the new plan, the group raises its concerns. He talks to the group and implies that he would be satisfied if the team did either of the following: complete the analysis and simply not record the hours (doing so would prevent the reported audit hours from going too far over budget) or do a minimal job on the analysis, which would save time and avoid having to question the client too much. You and a few other staff members express discomfort with either of these strategies. It is suggested that the ramifications of the new order be made clear to the manager. The senior wants nothing to do with this. He says, “She doesn’t want to hear these details so just use one of the ideas I have already given you.”

When he leaves, several staff members start griping about what they are being asked to do. A couple say they are going to leave the firm after this busy season, so they don’t really care about this issue. Another says, “We’ve been told what to do. Let’s just get on with it.”

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