Question

Real-Time Ethical Dilemma I was employed as a certified public accountant (CPA) for a regional accounting firm that specialized in audits 107 of financial institutions and had many local clients. My responsibilities included supervising staff, collecting evidence to support financial statement assertions, and compiling work papers for managers and partners to review. During the audit of a publicly traded bank, I discovered that senior bank executives were under investigation by the Federal Deposit Insurance Corporation (FDIC) for removing funds from the bank. They were also believed to be using bank funds to pay corporate credit card bills for gas and spouses' expenses. The last allegation noted that the executives were issuing loans to relatives without proper collateral. After reviewing the work papers, I found two checks made payable to one executive of the bank that were selected during a cash count from two tellers. There was no indication based on our sampling that expenses were being paid for spouses. My audit manager and the chief financial officer (CFO) of my firm were aware of these problems. After the fieldwork for the audit was completed, I was called into the CEO's office. The CEO and the chief operating officer (COO) stated that the FDIC examiners wanted to interview the audit manager, two staff accountants, and me. The CEO then asked the following question: “If you were asked by the FDIC about a check or checks made payable to bank executives, how would you answer?” I told them that I would answer the FDIC examiners by stating that, during our audit, we made copies of two checks made payable to an executive of the bank for $8,000 each. The COO stated that during his review of the audit work papers he had not found any copies of checks made payable to executives. He also stated that a better response to the question regarding the checks would be, “I was not aware of reviewing any checks specifically made payable to the executive in question.” The COO then said that the examiners would be in the following day to speak with the audit staff. I was dismissed from the meeting

Answer 1

If I were asked by the auditor’s if I had reviewed any checks written to bank executives, I would not have circumvented the question with the response from the COO, I would have answered the question as well as provided copies of the two (2) checks. I would have volunteered copies of the checks to the auditors, regardless of whether they were specifically requested or not, because I was already aware of the investigation by the FDIC. If circumstances were different, and there was not an investigation underway, then I don’t believe I would have volunteered the checks with them being specifically requested.

It appears that there was something unethical going on.   Are the bank executives taking money from the bank, I am not sure; however, I am sure something unethical and potentially illegal is happening within the accounting firm because the COO has asked me to lie about the two checks that I copied which were written to the bank executives. If there is nothing illegal or unethical going on, then I would not be asked to lie to the auditors.

I believe the ethics of the firm’s officers’ are “amoral” and pragmatic. There was no sense of concern for the employee when the COO offered what the “better response” to the auditor’s question should be but rather a perceived need of the moment. It seemed that the officers cared more about “stockholder” interest, not wanting to divulge the full truth so as not to upset the “paying” clients.

I believe the officers had the obligation to provide all “audit work papers” to the FDIC and allow them to make the determination as to whether the two checks were “questionable”.

I’m not exactly sure that I learned a “lesson” from this case study, however, what this case study has done for me is to further strengthen my belief (and ethics) that I will not lie or be deceitful to cover for anyone. I firmly believe that we are responsible for our own actions and must accept the consequences of those actions.