Love and a Question: What Should the CPA Do?

Irene Mac Elisa Montoya Hong-Yi Shih ACCT/BUS 895 (2007 Fall) Professor Danko

Agenda  Summary of the Case  Utilitarian Ethics (1) Convince Carrie to resign (2) Advise Carrie to report to the company’ s external auditor & the IRS (3) Discuss with Mr. Heywood (4) Do nothing  Categorical Imperative (1) AICPA Code of Professional Conduct (2) What can Carrie do? (3) Todd & Heywood’ s obligations  Conclusion Irene

Summary of the Case Who is Todd Davis? The Dilemma What should Todd do?

Irene

Utilitarian Ethics A form of consequentialism Benefit/Happiness/Pleasure

vs. Harm/Suffering/Pain The ends justify the means  the

morally right action is the one which generates the most benefits

4 scenarios Hong-Yi

Utilitarian Ethics (1/5)

Carrie’ s suffering  Bright

future as an apprentice of Mrs.

Cook Benefits for Carrie  Lack

of “doing-the-right-thing”culture overshadows any great performance  Possible investigation by the IRS Hong-Yi

Utilitarian Ethics (2/5)

Advise Carrie to Report to the External Auditor & the IRS Practically impossible because of

Carrie’ s loyalty to Mrs. Cook If Carrie takes the advise:  Personal

monetary reward from the IRS  Potential investors’ interests can be protected  Public confidence in tax system will be strengthen Hong-Yi

Utilitarian Ethics (3/5)

Discuss with Mr. Heywood Information is not sufficient (?) Heywood’ s knowledge about Mrs. Cook’ s practice (?) Heywood’ s ethic value Probable close friendship between

Heywood and the Cooks Benefits or harms are hard to measure Irene

Utilitarian Ethics (4/5)

Do Nothing Information is based on hearsay Todd’ s knowledge about Mrs.

Cook is limited Impact on his wife Consequences

Irene

Utilitarian Ethics (5/5)

Kant’ s Categorical Imperative Moral system is NOT based on

subjective considerations Human beings must unconditionally perform actions as fulfilling obligations Ethic decision must be made a priori Example: “ promise” Hong-Yi

Categorical Imperative (1/6)

AICPA Code of Professional Conduct Rules and Regulations Two Sections Rules Principles

Irene

Categorical Imperative (2/6)

AICPA Code of Professional Conduct (Continued) ET Section 53, Article II “ The Public

Interest” ET Section 102 –Integrity and Objectivity ET Section 501 –Acts Discreditable

Irene

Categorical Imperative (3/6)

What Can Carrie Do?  Institute of Management Accountants  Statement

of Ethical Professional Practice addresses ethical conflict as an employee performing accounting duties  Confidential discussion with an IMA ethics counselor  Identify legal obligation and rights Elisa

Categorical Imperative (4/6)

Todd’ s Obligation toward the Accounting Profession Uphold his obligations to the

accounting profession Integrity, objectivity, due professional care, and genuine interest in serving the public Discuss with Management Elisa

Categorical Imperative (5/6)

Mr. Heywood’ s Obligation toward the Accounting Profession Member shall be considered to have

committed an act discreditable to the profession… when the member fails to correct an entity's financial statements that are materially false and misleading.

Elisa

Categorical Imperative (6/6)

Conclusion Utilitarian Ethics Approach Kant’ s Categorical Imperative Insufficient information Mrs. Cook is not a client Do Nothing

Elisa