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QP Case Analysis

QP Case Analysis. Grant Lin Rajan Raval. Project Overview. Problem. Criteria for Analysis. Ethical Issues. Courses of Action. Recommendations. Conclusion. Problem Criteria for Analysis Ethical Issues Courses of Action Recommendations Conclusion. Problem. Problem.

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QP Case Analysis

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  1. QP Case Analysis Grant Lin Rajan Raval

  2. Project Overview Problem Criteria for Analysis Ethical Issues Courses of Action Recommendations Conclusion • Problem • Criteria for Analysis • Ethical Issues • Courses of Action • Recommendations • Conclusion

  3. Problem Problem Criteria for Analysis Ethical Issues Courses of Action Recommendations Conclusion • Beta has falsified financials • James’s situation • Personal Relationship vs. Professionalism • Personal relationship jeopardizes the audit’s independence and objectivity

  4. Criteria for Analysis Problem Criteria for Analysis Ethical Issues Courses of Action Recommendations Conclusion Solution must: • Comply with proper accounting principles and ethics • Seek to minimize total loss for all stakeholders

  5. 3 Ethical Considerations Problem Criteria for Analysis Ethical Issues Courses of Action Recommendations Conclusion • Integrity and Objectivity • Personal / Business Relationships • Practice and Client Conflicts of Interests

  6. Integrity and Objectivity Problem Criteria for Analysis Ethical Issues Courses of Action Recommendations Conclusion • Standards of Professional Ethics -1.200 - “…members should have regard to factors which reflect adversely upon integrity and objectivity…” • James’s approach to audit depends on standards - Safe, objective execution, reputation upheld - Integrity compromised, A&P in danger

  7. Personal / Business Relationships Problem Criteria for Analysis Ethical Issues Courses of Action Recommendations Conclusion • Standards of Professional Ethics -1.203 - “…close personal or business relationships can affect objectivity…ensure objectivity not endangered…” • Conflict of Interest between James and Alfred - Both companies and personal relationship in balance

  8. Practice / Client Conflict of Interest Problem Criteria for Analysis Ethical Issues Courses of Action Recommendations Conclusion • Standards of Professional Ethics -1.203 • “…a practice should not continue an engagement in which there is a significant conflict of interest between parties…” • James’s position - Bring A&P into a volatile situation? - Rescind Beta’s chances for a GEM position?

  9. Monetary Issues Problem Criteria for Analysis Ethical Issues Courses of Action Recommendations Conclusion “Money is the deciding factor in unethical business decisions…” • James’s current situation - Partner track - Landed large client and leadership role in Beta audit • Clean audit - Company will lose large potential revenue - Losing Beta may impede James’s upward track through A&P

  10. Courses of Action Problem Criteria for Analysis Ethical Issues Courses of Action Recommendations Conclusion There are two courses of action: • Choice Approach • Upholds James’s responsibility to his profession and friendship • Blind Approach • Short-term gains yield long-term losses

  11. Choice Approach Problem Criteria for Analysis Ethical Issues Courses of Action Recommendations Conclusion James’s Auditing Process: • Audit with utmost integrity and independence • Provide complete review of accounting records Alfred’s Decision: • Fix accounting records before audit commencement, or • Submit falsified accounting records

  12. Consequences of Choice Approach Problem Criteria for Analysis Ethical Issues Courses of Action Recommendations Conclusion If Alfred chooses to fix: • Receive unqualified auditing opinion • Expose Beta’s slow growth and losses • Beta loses opportunity to list on GEM If Alfred chooses to submit falsified records: • Receive adverse auditing opinion • Receive market and investor shock • Beta loses opportunity to list on GEM

  13. Blind Approach Problem Criteria for Analysis Ethical Issues Courses of Action Recommendations Conclusion James’s Auditing Process: • Not disclose the facts • Show only good results to attract more investors Consequences: • Beta will gain listing on the GEM • Receive additional capital financing • Alpha will receive additional revenue • James may receive promotion • Accounting scandal, economic turmoil, bankruptcy, criminal indictment

  14. Recommendations Problem Criteria for Analysis Ethical Issues Courses of Action Recommendations Conclusion The Choice Approach satisfies the criteria of: proper accounting and minimizing total loss • Doubtful accounting practices and ethical dilemmas are eliminated • Avoids consequences of Blind Approach • Economic turmoil, financial repercussions, criminal indictment • Alfred should fix accounting errors and provide full disclosure • Ensures legitimate use of auditing costs and an unqualified audit opinion

  15. Conclusion Problem Criteria for Analysis Ethical Issues Courses of Action Recommendations Conclusion • It is impossible for all businesses to succeed • Financial success is determined by the ability to generate profits and increase shareholder value • Alfred’s desire is noble, his methods were not • For accounting to truly reflect the financial status of a business • Ethics • Objectivity • Independence must be upheld

  16. The End Thank you for your time

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