Template/outline (for use after you have identified the decision-maker who has an ethical dilemma)
For example, if a client asked Ms CPA to hide income on a tax return, for instance, and Ms CPA’s boss also wanted her to do it, she would have an ethical dilemma: break the rules or disobey the boss.
Pick ONE of the following and respond
Three topics are described below. Please pick ONLY ONE, and analyze it according to the template described above.
Please indicated clearly in the subject line which topic you are addressing.
Choice one: Internal audit whistleblowing case Analyze the following case using the template described above. Ms. TB is the “decision maker” with the ethical dilemma of how to proceed when she discovers the error through her own further investigation, not through the audit program.
While Ms. TB was working for a large corporation in internal audit, her group was sent to Australia ahead of the fraud audit team of a singer who believed their royalties were being underpaid.
Ms. TB was assigned to this segment of the audit. She followed the audit program. Everything looked OK according to the audit program steps, but she had a gut feeling that the audit program was not adequate.
She cranked the royalty formula by hand as well as sending it through the computer. She found that there was a discrepancy in favor of the corporation. A predictable, consistent discrepancy. (The singer who planned to send in her own auditors was correct in her suspicions–the royalty formula generated by the computer was cheating the singer)
Ms. TB had her co-workers repeat her work, then showed it to her boss, who needed multiple instances of proof before he passed it up the chain of command. Ironically (or so Ms. TB thought), he was not pleased at the discovery.
The VP finance of the parent corporation flew to Australia. Ms TB was assigned to spend two days with him–mostly sight-seeing and dining out, while fielding questions about the discrepancy in a roundabout way. Ms. TB was baffled, but she took everything in stride. She felt that she had done her job, that she had done the corporation (and her immediate boss) a service by catching this error and sparing the corporation embarrassment or worse if the singer’s auditor had caught the mistake instead.
At one point, Mr. VP Finance asked Ms. TB what she thought had happened to cause the problem. Ms. TB told him that she felt that it was “above her pay grade” to ponder what caused the problem: her job had been to find any errors and report them up the chain of command. She did suspect that the error may have been intentional, but she did not want to point any fingers. She did not even ask him what was going to be done about it, even though she was curious.
End of case
Choice two: AJE whistleblowing case Analyze the following case using the template described above. Ms. TB is the “decision maker” with the ethical dilemma of how to proceed when she realizes that a material, fraudulent adjusting journal entry has been made, and that CFO and Board refuse to correct the error.
AJE Case:
About 14 years ago, while investigating the end of the year financial statements at SMC, Ms TB ( as part of her role of Chief Negotiator for the faculty union), discovered some adjusting journal entries in the hundreds of thousands of dollars, moving faculty salaries from one account to another.
•She asked to see the paperwork supporting the entries, which contained no explanation and were not signed by anyone.
•She asked the Controller that reported to the CFO what was going on, and it was pretty obvious (though unspoken) that the Controller had let Ms TB see the unadjusted as well as the adjusted general ledgers so that Ms TB would discover the huge journal entries that had been made without a written trail of approval.
•The adjustments directly affected the calculation of the “50% law,” which requires that, after adjustments, 50% of the state money paid to community colleges has to be spent on instruction (as opposed to administration or gardening). This is a major compliance item for state reporting and as part of the official annual audit.
•Before the AJE adjustments, the College was NOT in compliance; after the adjustments, the College APPEARED TO BE in compliance…but the original postings had been proper. The Adjusting Journal Entries were completely unjustifiable: their intent was to fraudulently misrepresent that the College was spending at least 50% on instruction, when in fact they were spending less.
•Long story short—it turns out that CFOs in community colleges all over CA were deliberately miscalculating this number. In a hearing in Sacramento, lawyers for the Community College League testified that this was a law that was “not meant to be followed.†Both Republicans and Democrats were outraged that college administrators were picking and choosing what state laws they would comply with, so A Bureau of State Auditors (Links to an external site.)Links to an external site.(BSA) audit was therefore commissioned.
•The BSA originally audited 3 districts, but expanded it to 10 when they found problems, and issued Report 2000-103:
•Finding 1: “ Six of 10 districts did not meet the 50 percent threshold for spending on instructor salaries despite having reported compliance with the law.“
•Finding 2: “We estimate that, in total, the six districts spent $10 million too little on instructor salaries.â€
•Extrapolated, this was a $100 million annual problem.
End of case
Choice three: current event
WhatsApp us