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Written Assignment Unit2

Jennifer Grace, an engagement manager, discovered issues with one of her client's, Fantastic Developments, loan valuation responses during an audit. She suspects possible fraud in the financial statements Fantastic submitted, but they contradict her knowledge of the struggling company. This raises ethical concerns around honesty and accuracy of financial reporting. Jennifer has two options - raise concerns with management or do nothing. Raising concerns upholds integrity but risks retaliation. Doing nothing ignores ethics and risks future issues. The recommendation is that Jennifer speaks up, seeks legal counsel, and follows protocols to address the situation effectively and be protected for her ethical actions.

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36 views5 pages

Written Assignment Unit2

Jennifer Grace, an engagement manager, discovered issues with one of her client's, Fantastic Developments, loan valuation responses during an audit. She suspects possible fraud in the financial statements Fantastic submitted, but they contradict her knowledge of the struggling company. This raises ethical concerns around honesty and accuracy of financial reporting. Jennifer has two options - raise concerns with management or do nothing. Raising concerns upholds integrity but risks retaliation. Doing nothing ignores ethics and risks future issues. The recommendation is that Jennifer speaks up, seeks legal counsel, and follows protocols to address the situation effectively and be protected for her ethical actions.

Uploaded by

mohamed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Case Analysis: Conflicting Clients

Student Name: Noriyuki Ishii

BUS 5115-01 Business Law, Ethics and Social Responsibility, University of the People

Written Assignment / Unit 2

Instructor Name: Dr. George Conley

29 June 2023
Case Analysis: Conflicting Clients

Introduction

Business ethics is always a challenging topic to conclude with universally effective solutions. The

case study of Conflict Clients is no exception. This paper explores the case by identifying the

relevant facts, ethical issues, stakeholders, possible alternatives, ethics of the alternatives, and

practical constraints. In the end, the attempt to make a recommendation would be made.

Relevant Facts

The case involves Jennifer Grace, the engagement manager, who discovered that Fantastic

Developments, a client of her firm, had not responded to confirmation requests for their loan

valuation during the audit review. Despite concerns about the company's financial status,

alternative procedures were used instead of further investigation. Jennifer suspects possible fraud

in the financial statements submitted by Fantastic, but the bank seems unaware of the situation.

Ethical Issues

The ethical issue in this scenario revolves around the potential presence of fraudulent financial

statements submitted by Fantastic Developments. The company's apparent turnaround and solid

financial position, as portrayed in the unaudited statements provided to the bank, contradict

Jennifer Grace's knowledge of the client's struggling financial situation. The concern is whether

the company intentionally misrepresented its financial health, which raises ethical concerns related

to honesty, transparency, and the accuracy of financial reporting.

Key Stakeholders

The key stakeholders are summarized below. (Fernando, 2023)


● Coshocton National Bank (CNB): As the provider of financial services, the bank has to

respect financial regulations defined by regulatory bodies.

● Fantastic Developments: Being involved in the potential misrepresentation of its financial

position, the decisions of Fantastic Developments would impact its own reputation.

● Jennifer Grace: As the engagement manager, Jennifer has a stake in upholding professional

ethics and ensuring the accuracy of the financial statements.

● Audit Firm: Although it is not explicitly mentioned, the audit firm’s reputation and

credibility to professional standards are at stake based on how the situation is handled.

● Investors: Depending on the circumstances, investors of Coshocton National Bank and

Fantastic Developments may be impacted by the potential fraud.

● Regulatory Bodies: Regulatory bodies, such as accounting boards or authorities, may also

have a stake in ensuring compliance with professional standards and ethical conduct in the

auditing and financial reporting processes.

Possible Alternatives and Ethics

There are potentially two options for Jennifer to find a resolution. The first is to uphold

professional integrity and raise concerns to her managers as a potential criminal case. This option

is obviously the ethically “correct” choice from the Justice Perspective, not only because Jennifer

gets to maintain professional fairness but also to save the company from going through similar

risks in the future. (Moriarty, 2016) The second option is to do nothing and forget the potential

crime she might have come across. Although it is obviously an ethically incorrect choice since

business ethics would be ignored and also may put the company in a very risky situation.

(Reynolds, 2022)
Constraints

The fear of retaliation is a common constraint, where Jennifer perceives any risk that the Fantastic

Development personnel or CNB leadership would blame her for whistleblowing. Also, personal

constraints may have influences. For example, if Jennifer has small children to feed, she might feel

reluctant to speak up as her job security might be threatened. Lastly, any lack of trust between the

company and Jennifer potentially stops her from taking the ethical choice, with the sense of

negativity that everything would stay the same even if she takes the risk. (Steinfeld, 2017)

Recommendations

Given honesty and fairness are two of the key elements of business ethics, the recommended move

for this case is the first option discussed above, where Jennifer to speak up about her concern and

maintains professional dignity. (Indeed Editorial Team, 2023) Ideally, she should look for

consulting legal experts, follow reporting protocols, and strengthen due diligence procedures are

also advised to address the situation effectively and prevent similar issues in the future.

Meanwhile, this recommendation is constructed with a critical premise that Jennifer should be

protected legally and professionally regardless of whether fraud existed or not for her ethical

bravery. Her positive and courageous attitude to reporting the issue should be praised and

appreciated by the key stakeholders mentioned earlier.

Conclusion

In summary, the case study emphasizes the importance of ethics, independence, and thorough

investigation in the auditing profession. By promptly addressing suspicions of fraud and taking

appropriate actions, auditors can uphold trust, protect stakeholders, and contribute to a transparent

financial reporting environment.


References

Fernando, J. (2023, March 4). What Are Stakeholders: Definition, Types, and Examples.

Investopedia. https://www.investopedia.com/terms/s/stakeholder

Indeed Editorial Team. (2023, April 20). How To Uphold Business Ethics in the Workplace.

Indeed. https://uk.indeed.com/career-advice/career-development/business-ethics

Moriarty, J. (2016, November 17). Business Ethics (Stanford Encyclopedia of Philosophy).

Stanford Encyclopedia of Philosophy. https://plato.stanford.edu/entries/ethics-business/

Reynolds, P. (2022, November 15). Stop Ignoring Bad Behavior: 6 Tips for Better Ethics at Work.

HBS Working Knowledge.

https://hbswk.hbs.edu/item/stop-ignoring-bad-behavior-six-tips-for-better-ethics-at-work

Steinfeld, J. (2017, August 10). 5 Reasons Why Employees Don't Speak Up and How to Fix It. Inc.

Magazine.

https://www.inc.com/jay-steinfeld/5-reasons-why-employees-dont-speak-up-and-6-ways-t.

html

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