Ethical Decisions in Accouniting

Albert Gable, a partner in a small Midwestern city CPA firm, has a serious ethical decision to make. Due to a routine audit of the local bank, it has come to his attention that two of his clients, which are now his friends have conflicting financial records. According to the bank the male, Larry Wilson, is preparing to divorce his wife, Susan, and in the process make sure that she walks away from the marriage with nothing (Business & Professional Ethics, 2007). Basically, Larry is setting up separate accounts that his wife is unaware of, so that when he files for a divorce his actual funds will be hidden, leaving her with nothing from the separation. The ethical dilemma that Albert faces is whether to remain quiet to his friends, resign from the position as their CPA, or tell them what he has found. All three decisions will cause different results, and each has their bad side. First of all, if he remains silent, then he knowing prepares their personal financial plans with false numbers. Secondly, if he resigns from the position as their CPA, then he loses his bonus which he is relying upon to send his daughter to college. And lastly, if he addresses the problem that he found with his friends, he breaks the confidentiality rule which the accounting profession must follow, which not only applies to the bank, but to Larry and Susan individually as well.

There are two main stakeholders involved in this ethical dilemma, as well as two minor ones. The main stakeholders are Larry and Susan Wilson, whose lives would be affected with any decision that is made. Larry, who may or may not be setting his wife up for a fall, could lose his wife and his money. Susan could be misinformed because the story is only a rumor, and she could give up on a marriage that may be fixable. And if Susan is not told, she could lose the share of the money that she is entitled to if a divorce actually occurs. The two minor stakeholders in this case are Albert and the CPA firm. Albert could remain silent, do his job, and knowingly break his professional code of ethics, or he could betray his oath of confidentiality, or he could give up his bonus, thus possibly sacrificing the college needs of his daughter. The firm could lose the Wilson's as a client if the wrong decision is made, which would affect their overall profits.

When Albert considers this ethical decision from a stakeholder's impact analysis standpoint, then the 5-question approach has to be used (Business & Professional Ethics, 2007). First of all, which decision is the most financially beneficial to all the stakeholders? In this case, any decision made will benefit a stakeholder and hurt another, so this question is skipped. The second question to be asked is which decision is the most legal. Since breaking the confidentiality clause if Albert says anything, the only decision left is to step down as the Wilson's CPA. The next two questions deal with fairness and which decision is right. The fair and the right decision would be to sit them down and inform them of what he found, and then allow them to work out the real details of the situation. The last question that has to be considered is whether any decision would increase further sustainability to any of the stakeholder's involved. When considering the 5-question approach to stakeholder analysis the decision that has to be made is still left unclear, so other methods have to be used.

The next step in the decision process has to be to consider philosophical approaches to ethical decision making. Consequentialism and Deontolgy theories are both useful in this case. Consequentialism states that any decision should be made based upon the overall consequences of the entire stakeholder's involved (Stanford Encyclopedia of Philosophy, 2006). A decision made based on this form of analysis would state that for everyone involved it would be best for Albert to step down as their CPA, and to lose his bonus. Deontolgy states that a decision has to be made based on rights, duties, and justice and the action involved rather than the consequences (New World Encyclopedia, 2008). Once again, the philosophical approach states that Albert needs to keep quiet, uphold his codes of ethics and confidentiality, and hand over the Wilson's account to a different CPA within the firm.

After all the decisions are considered, and all the stakeholder's are considered, there is only one clear decision for Albert to make. He has to step down as Larry and Susan's CPA by claiming that he has a conflict of interests within the clients and their true financial position. The first mistake that was made was becoming friends with his clients, and the second mistake that he made is going to the bank and investigating the discrepancies in the financial records of the Wilson's. Even though his bonus from keeping them as clients will be lost, and his daughter may not be able to go to college immediately after graduation, confidentiality and accounting codes of conduct demand that he makes this decision. In this way, the main stakeholders involved will not be negatively affected by his decision, the firm will not be hurt from the decision because they will retain the Wilson's as clients, and this makes the majority of the stakeholder's neutral in the decision, while allowing Albert to maintain his professional code of actions.

Business & Professional Ethics Approaches to Ethical Decision Making Axia College Website
New World Encyclopedia Deontology Ethics New World Encyclopedia Online
Stanford Encyclopedia of Philosophy Consequentialism Stanford Encyclopedia Online