source to rely on when ethical problems would arise within their consulting work. The consumers would see a direct benefit by the enactment of consulting standards for CPAs because they would have an exact outline of what to expect. Discussion question #3a) How could have the relationships between E&Y and the various parties affected E&Y’s advice toMGR? Given these relationships, do you think that E&Y acted unethically? Why or why not?There were two relationships that E&Y did not disclose to MGR that ultimately led to their unethical decisions. The first relationship was with MGR’s hired bankruptcy firm, Swindler & Berlin. The case stated that E&Y had engaged in over 13 previous transactions with this law firm before they were hired by MGR, and that E&Y had even paid Swindler & Berlin $5.3 million for previous services. The other relationship was with MGR’s landlord for several of their retail stores, Rouse Co. E&Y had a contract with Rouse to provide tax services before they even began dealings with MGR. This means that E&Y had a good reason to keep MGR’s stores in operation for as long as possible, so that Rouse could continue to collect rent revenue. In conclusion, after considering these two undisclosed relationships, it is fairly easy to say that E&Y acted unethically. Discussion question #4a) What was hourly billing rates of the E&Y partner in the MGR in case?Mr. Hopkins charged $450 an hour.
b) Was there anything noteworthy about the overtime meals charged to MGR?This was included in unreasonable expenses: “Charges included reimbursement for a dinner for three of the consultants totaling in excess of $200” (Messier, Glover, & Prawitt, 64).c) Assume that $1.00 spent in the mid-1990s is now equivalent to about $1.65 in 2014. What is the2014 “cost” of both the hourly billing rate and meals?$1.65 x $450 = $742.50 per hour cost, $1.65 x $200 = $330 for a dinner for three consultants. d) Would these costs be considered unreasonable in “today” dollars, especially considering thatE&Y partners are charging Detroit $805 per hour1 for consulting services associated with theCity’s bankruptcy?Yes these costs should still be viewed as unreasonable. It is unfair to compare the case to this unproportioned example. The size and quality of service that is required for an audit of an entire city is on
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- Fall '13
- Ethics, Big Four auditors, professional services, E&Y, Mark A. Hopkins