Question

Michael Fox is a promising senior manager beginning his tenth year at his audit firm. Michael has been a steady performer during his career and is known for his technical and personal skills. However, not all of the firm's partners are enthusiastic about Michael. His track record for bringing in new clients has been marginal. This weakness has not stopped Michael from moving up the ladder, but slow expansion in the client base has meant that the firm has not made a new partner for three years. Michael is well aware that his ability to bring in new clients is critical to his aspirations to become a partner. PQR Manufacturing Ltd (PQR), a large stationery manufacturer, has decided to put its audit and related accounting services out for tender. PQR's current auditor performs significant non-audit services. In fact, fees for non-audit services are well in excess of the audit fee. Michael has been given primary responsibility for developing and presenting the tender to PQR's board of directors. He has nearly completed preparations for the presentation and has discussed all the specifics with two partners who will have a significant involvement in servicing the audit and related service needs of PQR, should the firm be successful in its tender. As required by the board of PQR, a detailed outline of the proposal presentation and itemised preliminary budget were submitted four weeks in advance of the presentation. On the Thursday evening before the presentation, Michael's wife receives a call from her sister, Sandra. Sandra's flat mate, Suzanne, is the secretary of PQR's managing director. Suzanne had noticed that one of the proposal presentations was going to be done by someone named Michael Fox and asked Sandra whether it was the same Michael Fox who was married to Sandra's sister. Sandra had said that it was, and Suzanne had begun to tell her about some of the proposals. Suzanne had said that she had noticed several things about the managing director's evaluation of the proposal submitted by Michael's firm. Firstly, the bid was significantly higher than one of the other bids. Secondly, the managing director had mentioned two items of major importance that had been left out of the proposal. Suzanne could not remember what these two items were off the top of her head, but she told Sandra that she would be willing to run off a copy of the memo if Sandra wanted her to. Michael's wife tells him about the call from Sandra at dinner that evening.

1. You must find out the alternatives which is available for Michael.
2. Compare values and alternatives. Please explain the relevant consequences and ethical values of each alternative.

Answer 1

It is grossly unethical and in violation of trsut of position on part of Suzzane to discuss official matters with outsiders.Being secretary to the MD is a great position of trust and she is privy to confidential information.Leaking this outside tends to breach of trust.She is is completely misusing her position and breaking the trust reposed on her by the Organization.

On part of Michael accepting and acting upon this information will be ethically wrong too.Getting the assignment this way by taking advantage of "Inside Information" even though it came to him naturally is incorrect.

The alternative is to start the presentation the next day with his understanding of the scope of the current assignment.If the same is in line with the client then he should proceed or else should seek time from client to revise the bid offer and then do the presentation.This is the correct alternative to accepting the Inside Information and acting.Auditor position is position of trust where highest standards are expected and this way he can demonstrate that his firm believes and practices them.

If he accepts the inside information from Suzzane and amends the proposal and scope and presents it will be wrong.He might end up getting the audit assignment but later if this gets public he runs the risk of loosing the assignment and Suzzane getting fire.In addition the reputation of audit firm will also get hampered and will affect their future in already struggling market conditions.Similar consequences will follow for Suzzane she might not be able to get a job as her breach of trust will be a dark mark on background verifcations carried out.