Case 2-1 A Team Player?

School: Southern New Hampshire University - Course: ACC MANAGERIAL - Subject: Accounting

Case 2-1 A Team Player? (a GVV case) 1.Discuss these issues from the perspective of Kohlberg's model of moral development. How does this relate to the established norms of the work group as you see it? Diane and the ones who did not want to take the matter to Jessica, the senior, are reasoning at the pre-conventional levels of avoiding punishment and satisfying one's own needs. They want to avoid having more work to do or receiving a low evaluation from missing a mistake (Diane) or going over the time budget. Barbara and Haley are reasoning at the conventional and, possibly, post conventional levels. They want to be fair to the firm, the client, and the public, and know that they are following audit standards (law and order). It is possible that they are reasoning at level 5, social contract. They fully understand the social contract CPAs undertake to protect the public interest in financial markets. Barbara understands that the deficiency could be more serious than the group of staff auditors understands or that the deficiency could lead to other problems. It could also lead to problems with internal control deficiencies over financial reporting. Often groups want to have a clear-cut leader or work by majority rule. However, ethics does not go along well with majority rule. If a group decides by majority rule to rob someone, it does not make the theft right or ethical. Barbara should tell Jessica about the deficiency. 2.Assume you are in Barbara's position. What would you do and why? Consider the following in answering the question: Barbara should explain to the other team members that she feels compelled to go on and tell Jessica. She can say that she understands their concerns and will take all the blame for not finding the deficiency sooner. She also can state that telling Jessica will show their integrity, due diligence, and professional objectivity by not ignoring information that could impact the conclusion of the audit Barbara can also solicit the help of Haley who supports Barbara's point of view. There is strength in numbers so going together to talk to Jessica should enhance Barbara's position and its legitimacy in the eyes of Jessica. Diane and the other team members may still push back against Barbara telling Jessica. Diane and the other team members may feel that they will still be blamed and be assigned even more work to do. They may be fearful of receiving low evaluations.

Barbara should then go talk to Jessica and explain in detail why Jessica or the manager or partner may need to know about the deficiency. Jessica may at first be mad that the deficiency is just coming out as the audit is nearing completion. She may not want to go over the budget, which could affect her promotion to manager. Jessica may play the "loyalty to the team" card or say just ignore it this one time in trying to convince Barbara to let the deficiency go. She may emphasize that it is not material to the audit as well.  If Jessica does not want to listen or does not believe Barbara, Barbara should document her concerns in the work-papers. Will Jessica allow the work papers to go forward with Barbara's concerns? Should Barbara consider going to the manager or the partner? Standard practice is to go to the immediate supervisor, not jump over reporting lines. SOX and Dodd Frank laws are trying to protect whistleblowers and to get financial statement corrections done quickly. Most public accounting firms have a reporting mechanism like ethics hotlines in public companies, so that Barbara might employ that mechanism to report the error without going over Jessica's head.