Case 1Nondisclosure is not considered an acceptable alternative because it makes you an

accessory to the fact. Disclosure to the offending party only - with no action - may result in the destruction of part of the evidence. Probably, the first step is to report the matter to the chairman of the board. Circumstances, however, may require that the matter be referred to an external body such as the Securities and Exchange Commission, Justice Department, Bureau of Internal Revenue, or the shareholders.

Case 2The appropriate action depends on the type of company:1. Privately held company in which the president is the owner: Discuss the matter with the

president who, as owner, can make the decision.2. Company with several shareholders in which the president holds a controlling number of

shares: Discuss the matter with the president. If the president accepts the recommendation and resigns, the problem is resolved. Otherwise, the matter should be discussed with the chairman of the board and the board of directors.

3. A large publicly held company: The tendency here is to step over the president and go directly to the chairman of the board. This is unwise. You have a responsibility to discuss it first with the president.

Case 3The honest and ethical solution is to tell it as it is. The most tactful approach is to make a

full disclosure to the president privately, pointing out the vast growth of the company and the tremendous changes in technology that have occurred since he, as controller, installed the system. If he understands the danger in which he is putting himself with regard to a possible dissident shareholder, he probably will acquiesce and agree to go forward. If he doesn’t, and this is a privately held company in which he has control, you have accomplished your task. In a publicly held company, you may need to report the problem to the chairman of the board if the impact on the annual report is serious.

Case 4Professional ethics requires that you accept only those engagements which are felt to be

beneficial to the client. Clearly, if the results of the study are favorable, the client will be benefited. There is only a 50 percent chance, however, that this will result. The question, therefore, is whether a 50 percent chance of benefit is sufficient to pursue the study. Many consultants would answer yes to this question and accept the engagement because of the potential profit. The consultant who faced this situation declined the engagement and suggested that the client should use the money set aside for the feasibility study to employ an advertising firm to help them sell the bonds. This decision was justified by what the consultant thought was the client’s best interest.

Case 5Ethical conduct requires that you not misrepresent facts and never subordinate judgment

to others. Further, you should not serve a client under terms or conditions that might impair objectivity, independence, or integrity, and you should reserve the right to withdraw if conditions develop that interfere with successful conduct of the assignment.

The consultant who was faced with this situation refused to follow the direction of the president, and the president refused to pay the consultant’s fee. The president wanted to use the consultant as a means for firing a vice president. Ultimately, the fee was settled and no report was issued.

Case 6Professional ethics require honesty, integrity, and placing the interests of the client or

prospective client ahead of personal interests. The fact that this is an internal consultant, as opposed to an external consultant, makes no difference. The internal consultant wrote the report based on the available facts and was discharged.

Case 7This is considered an ethical issue because its solution involves the future of the

consultant’s personal doctrine and nonprofessional associations as well as the effectiveness and integrity of the consultation process in which the consultant is about to engage. The principles involved in this case are not uncommon.

Although accepting such engagements would not be in violation of the code of ethics, acceptance would be ethical only if the consultant’s relationship with the client firm were completely divorced from the consultant’s personal doctrine and the client was made aware of the consultant’s values. These circumstances are not likely, and the consultant would be justified in declining such an engagement because of a conflict of norms.

Case 8This arrangement is not acceptable under professional ethics. A consultant should not

pay a fee or commission to obtain a client or franchise a business practice. The fact that the client came first and the commission came second in this case makes no difference. The commission is being paid to franchise a business practice.

The consultant who was faced with this situation accepted the engagement. After it was completed and he had paid the fee to the public relations agency, it was discovered that the city manager’s brother owned the public relations agency. This disclosure was made in conjunction with the city’s audit. The consultant willingly cooperated with the attorney in prosecution of the case. The matter was brought to the ethics committee and, while the consultant was in violation of the ethics code, he was discharged with a reprimand. His willingness to assist in the prosecution and the fact that he was not prosecuted in the case were significant in this decision.

Case 9You are not in a good position from an ethical point of view. Your position as a director

provides you with a significant influence over the direction of the company. As such, you have a responsibility to do what is best for the company. Your responsibility to the consulting firm is to secure employment to keep your people busy. By being both director and consultant for the same company, you are in a position that creates a conflict of interest, which is in violation of the code of professional ethics.

Another problem is your planned conduct in the upcoming board meeting. It is not honest and ethical for you to remain silent when you have relevant information on a decision.

You have a responsibility to express your feelings about the proposed engagement even if it means losing the engagement.

The solution here is to resign from the board of directors and become an advisor to the chairman. You should point out how you feel about the installation of the sophisticated system at this time. An objective decision can then be made by the board on all the available facts.

Case 101. The firm and the two clients2. YES, because the performance of the employees of a certain company reflect their working culture, thus unethical practices of its employees can be detrimental to the company’s reputation.3. YES. There’s a high probability that the other consultants’ name would be attached with negative connotation because of Leo’s decision.4. As a consultant, I should be transparent and be truthful and honest in all of my business dealings. Being unmindful of the actual expenses incurred, the clients should not be taken advantage of but rather benefit from the efforts I exert to help them. This being said, billing and charging the actual amount of expense to the clients should be taken rather than pursuing self-gain and interest. This would definitely mean a positive impact not only to my image but more importantly, to the whole firm I represent. The clients will draw an impression as we put their interests ahead of our own. This creates, as well, the virtue of discipline which, among other traits, every consultant should uphold. 5. I should follow the hierarchy of resolving issues within an organization. First, I should talk to Leo and discuss that what he have done was detrimental to the organization’s integrity. This is also an avenue for an open dialogue to be able to listen and comprehend the circumstances he is coming from and in order for me to objectively respond and weigh things afterwards. If things don’t turn out well and proven that the act is purely unethical, it is but important to discuss the matter with the higher management and let them decide for the next steps they deem necessary to settle the issue. On a separate note, I will take Leo’s circumstance as a lesson and guide to do what I think is right in case I will be exposed to the same.

Case 111. Contingent fees may give rise to threats to compliance with the fundamental principle in certain circumstances such as a self-interest threat to objectivity. In case of Ms. Zabio wherein she offers a payroll system which will be in a contingent basis the assurance of the payment will depend on the happening of the engagement in which threats will depend upon the nature of the engagement, the range of possible fee amounts, the basis of determining the fee and whether the result of the transaction is reviewed by an independent third party. It is also considered unethical on the part of Zorro because as the client’s CPA he should aware on the needs of his client and he must not just charge or offer to his client a fees which are not in accordance of the services performed, time required, experience, ability, reputation, etc. 2. Yes, it is because Zorro as an accountant of Wee corporation for almost how many years in which he is the only one who audits the financial statements of the corporation how come that he didn’t had any idea on having a lower cost payroll system. It’s quite obvious that Zorro place his personal interest ahead of the interest of the client in which case it impairs integrity and independence.

Case 12

Transparency should be practiced in this situation. As a consultant, he should disclose to his client the clerical error made. After disclosing these data found, a consultant should advice his client to show this misstatement in the company’s financial position. However, it is still up to the client, the ultimate decision maker, to take action whether to reflect the misstatement in the financial position as a liability or disregard the suggestion of the consultant.

Case 13a. Being an independent consultant brings a lot of advantages. If a consultant is independent, he or she can make certain advice to a client based on impartial consideration of all pertinent facts and can make responsible opinions. Being independent, avoids conflict of interests. Being independent does not impair objectivity or integrity.b. The interests of the clients must be placed ahead of personal interests and the consultant must serve the client with integrity. Mendoza should not assume the role of the management. However, Mendoza, must first study the commission and find out facts that may affect the decision of the client. Mendoza, should develop recommendations designed specifically for the issue and relay it to the client. The client, has the final discretion whether to accept the commission or not.

Case 141.a. It is not possible for the auditors to objectively evaluate their own nonattest work as it relates to the audit. Thus independence related to the audit is impaired.b. The additional fees derived from nonattest services serves as an additional threat to auditor independence.2. a. Auditors have been providing nonattest services for audit clients for years in an objective manner. b. The additional knowledge of the client obtained from performing nonattest services actually enhances the performance of the audit.

c. As long as the client establishes effective oversight over the performance of the nonattest services, the auditors can perform them in an objective manner.3. Independence would be impaired if a CPA firm determined or changed journal entries, account codings or classification for transactions, or other accounting records without obtaining client approval, authorized or approved transactions, prepared source documents, or made changes to source documents without client approval.

However, independence would not be impaired if the CPA recorded transactions for which management has determined or approved the appropriate account classification, or post coded transactions to a client’s general ledger, prepared financial statements based on information in the trial balance, posted client-approved entries to a client’s trial balance, or proposed standard, adjusting, or correcting journal entries. This additional services performed actually enhances the performance of the audit and provided it is done with the effective oversight of the client, independence and objectivity is not impaired.

Case 15

Before accepting an engagement, Ju & Grace should assess if they are competent enough to do it. They accepted it but they don’t have experienced staff and they just assigned newly hired staff assistants without sufficient supervision. The assigned staffs should always have sufficient supervision, especially those who are newly hired. The management of Wonder, Inc. should have sufficient knowledge of the company who they engaged with, if Ju & Grace have expertise in computer and in installation of a new computerized production system.

Ju & Grace are responsible for the backlogs and lost product sales incurred by Wonder, Inc. because by accepting the engagement, Wonder, Inc. gave their trust to them, expecting to do their job well. If they continue assigning those newly hired staff to their production system, there is a possibility that the Wonder, Inc. will continue incurring losses that may result to insolvency and bankruptcy. They should always remember that in every engagement, their name (Ju & Grace) and the future of the company (Wonder, Inc.) is at stake.