Accountant Daniel Potter, an Accounting

¶ … Accountant

Daniel Potter, an accounting auditing manager, must make an ethical choice. Should he dismiss the ethical codes and obligations of his profession and continue to follow the instructions given to him by his supervisor, or should he hold fast to the ethical principles he believes are part of his professional standing and licensure? Potter worked for one of the Big Eight accounting firms, was aware of the various shades of gray often imposed by management in a firm, but never realized the magnitude or the seriousness of the issue until Senator Metcalf (D-Montana), released a report on the public account industry that was quite negative towards accountants. This issue came to a head when Dan submitted his files to a supervisor regarding the value of property on their balance sheet. Dan, in fact, recommended that an exception be submitted showing disagreement between the client and the accountant on the value. Dan's supervisor sent him a memo asking him to remove the pages that showed disagreement, which Dan refused to do. All of this caused Dan to question his own performance, the performance of the firm, and the idea of ethical behavior in the world of accountancy.

Stakeholders -- There are four stakeholders in this scenario, all with varying degrees of both involvement and interest in the overall project.

Dan Potter -- Dan is interested in pursuing a career that is both intellectually stimulating and ethical. He believes in standards and cannot see compromise as a viable option. His major interest is maintaining his own and his employer's reputation so that not only will the company prosper, but Dan will grow in his career.

Oliver Freeman -- Oliver is the senior manager on the real-estate subsidiary project (Sub). He uses rather archaic management styles to keep employees in line, wants good relations with the client based on their need, and wants to secure his own career with the firm by providing high-paying clients.

Baker Greenleaf -- Management at BG need to have high standards in order to maintain their own reputation and expanding their customer base, but cannot be known as difficult with whom to work. Their role is to increase the firm's revenue base through more clients. Their assumption is that reports published by the firm are accurate and legal.

Sub -- the Sub, or client's management want a clean audit report, and while they understand the material misstatement, are concerned that this would draw unneeded attention to the report.

Course of Action- While Dan has a clear procedural point; the actual effect on the bottom line for the client is relatively minor. Still, Dan sees the issue in very black and white terms -- there is right, there is wrong, and there is an ethical responsibility to ensure that the work is correct. It is not particularly efficient for Dan to butt heads with Oliver over the issue because Oliver will seemingly not budge. The major issue is one of liability, even though that issue is improbable. Ideally, there should be a review board, or someone to help mediate a decision such as this. Dan found out later that Oliver had pulled Dan's evaluation from the file and submitted his own, clean, opinion. Oliver also posted a negative evaluation for Dan, but unless Dan said something, his name was on the report and he was liable.

Dan's issue is tenuous -- if he goes over Oliver's head, he will be seen as someone who is not a team player. If he lets the issue slide, he could be liable and the cause of a legal suit against the company, as well as is branded because of his negative review. Dan's first step would be to speak with a representative in Human Resources, outlining his concerns in writing, citing the legalities and the potential liability to the firm. He needs to do this in a non-confrontational manner that focuses specifically on the ethical issue, and not the personality conflicts.

Dan, in fact, has several issues towards his benefit. 1) Ethics are not an "except for" and he has the legal and moral obligation to provide correct and ethical work for his clients and his company; 2) if he had followed his supervisor's instructions, he would be challenging professional accountancy codes as well as putting his, and the firm's, professional and legal integrity on the line; 3) if Dan does nothing and something does go wrong, he will be the scapegoat unless there is a clear paper trail showing the steps he took to mitigate the situation.

Dan should take the following steps: 1) Write up a formal letter expressing his concerns, etc. And plan of action to Oliver, ccing HR. 2) Depending on the response, he, or he and Dan should meet with HR; 3) if there is no satisfactory outcome, HR should facilitate a meeting between Dan, Oliver and Oliver's supervisor; 4) if no satisfactory conclusion can come out of that, it would be an issue for the management team who would make a final determination.

Stakeholder Impact -- Stakeholder impact is problematical to predict: 1) Dan and the firm could be liable for an error in reporting, as could the client; 2) Dan could lose his accounting credentials if a problem occurs; 3) Dan may be passed up for promotion because of the negative review; 4) Dan could be seen as negative and not a team player and be let go by the firm; 5) Oliver could either be reprimanded or rewarded; 6) the client could either be very pleased or upset at the lack of professional nature; and 7) there could be various impacts to the firm; ranging from more clients, fewer clients, loss of staff, or legal issues.