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Running head: BUSINESS ETHICS
Ethics In Accounting
Term 1 Written Assignment (Unit 2), BUS 5115 Business Ethics
Author Name Hidden
University of the People
Student Email: Hidden
Instructor:
Todd Cooley
ETHICS IN ACCOUNTING
PROBLEM STATEMENT
Jennifer Grace, First year member of her CPA firm’s management group
Tom Ward, CFO of Fantastic Developments, Inc., a client
While reviewing the current-year audit working papers of Coshocton National Bank (CNB), the
engagement manager, Jennifer Grace, noted something curious. In the working papers related to
loan valuation, Jennifer saw that the commercial loan of Fantastic Developments had been
randomly selected for confirmation but that Fantastic had not responded to either the initial or
second confirmation request. The audit staff disposed of this “loose end” by alternate procedures:
examining cash collections (which had become somewhat sporadic) and vouching to underlying
loan documentation, including a set of recent (unaudited) financial statements that showed
Fantastic’s solid financial position and operating profitability.
Jennifer noted this reference to Fantastic Developments because this private company was also a
client of her firm. In fact, Jennifer had served as the audit senior on the prior-year audit of
Fantastic. She knew that the company had been struggling for a couple of years and had
experienced recurring operating losses. Her knowledge of Fantastic did not reconcile with the
discussion in the audit working papers related to the financial statements furnished to the bank.
When Jennifer contacted Fantastic’s CFO, Tom Ward, and inquired about the company’s
apparently miraculous turnaround, he was noncommittal and unhelpful. Tom replied that
business had picked up. He apologized for not calling Jennifer’s firm himself because he had
been so busy, and then he told her that Fantastic had decided to engage another CPA firm for its
accounting and auditing needs. Although confused, Jennifer obviously couldn’t reject the
possibility that this abrupt dismissal was a direct consequence of her inquiry.
