Expert answer:Accounting Ethics Project
Expert answer:please see attached ethic project
umuc_ethics_project__13__1.docx
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I.
Project Title:
The University Bookstore: Valuing Familiarity at the Expense of Ethics
II.
Introduction:
Working as an accountant or auditor means you are more likely to be confronted
with ethical dilemmas and or fraud. Accountants and auditors have an explicit
responsibility to an organization’s stakeholders and to the general public to
perform their work with due diligence. They must understand risk factors and
know how to mitigate risk. Once you become a professional accountant and/or
auditor, you must adhere to the AICPA’s Code of Professional Conduct or The
Institute of Internal Auditors Code of Ethics, as well as the code of ethics of the
organization where you work.
In this project, you will examine a real-life situation to identify potential
stakeholders, discuss possible ethical issues, and propose actions to mitigate
fraud. Your role in this project is that of the internal auditor for a university
bookstore. Completion of this project will show your ability in a number of
competencies.
As you complete this project, focus on the following goals and competencies:
Goal 1: Communication: Learners demonstrate ability to communicate clearly both
orally and in writing.
o Competencies:
▪ 1.1 Organize document or presentation clearly in a manner
that promotes understanding
▪ 1.2 Develop coherent paragraphs or points so that each is internally
unified and so that each functions as part of the whole document or
presentation
▪ 1.3 Provide sufficient, correctly cited support that substantiates the
writer’s ideas
▪ 1.4 Tailor communications to the audience
▪ 1.5 Use sentence structure appropriate to the task, message and
audience
▪ 1.6 Follow conventions of Standard Written English
Goal 2: Critical Thinking: Learners demonstrate ability to apply logical, systematic
decision-making processes to formulate clear, defensible ideas and to draw ethical
conclusions.
o Competencies:
▪ 2.1 Articulate and frame the issue
▪
▪
▪
▪
2.2 Collect and evaluate information
2.3 Evaluate the underlying causes or conditions of elements
contributing to an issue
2.4 Use systems thinking to arrive at a decision in the context
of an issue
2.5 Apply ethical principles when determining actions.
Goal 3: Quantitative Reasoning: Learners demonstrate the ability to use mathematical
operations and analytical concepts and operations to address problems and to inform
decision-making
o Competency
▪ 3.1 Construct models that represent real-world problems or
processes
▪ 3.2 Develop visible representation of data
▪ 3.3 Analyze data using mathematical/algebraic operations
▪ 3.4 Use calculated results to inform the problem or process
Goal 4: Leadership, Facilitation, and Collaboration: Learners lead, facilitate, and
collaborate with a variety of individuals and diverse teams to achieve organizational
objectives.
o Competency
▪ 4.1 Demonstrate an ability to plan a particular objective or goal
Goal 12: Functional and Personal Competencies in Accounting Ethics: Learners
demonstrate conduct that meets the standards of professional practice that reflects
acting in an honest manner, free from conflicts of interest, and within the boundaries of
law.
▪
Competencies
o 12.1 Legal, Regulatory, & Ethical: Learners demonstrate an applied
understanding of ethics, professional responsibilities, and legal issues
affecting the accounting professions.
o 12.2 Legal, Regulatory, & Ethical: Identify and respond to situations that
may be unethical or in violation of professional standards.
o 12.3 Communication: Effectively communicate the importance of ethical
behavior to clients.
Goal 15: Functional and Personal Competencies in Accounting Ethics: Learners
demonstrate
o Competencies:
•
•
15.2 Use authoritative guidance to accomplish tasks and solve
accounting-related problems
15.3 Critical Thinking: Use professional judgment to identify key issues
with a client’s system of controls and relevant financial statement
sections
Case specifics:
Rich has worked as the textbook manager at a public university since 1999.
When the previous bookstore manager left in 2002, Rich applied for his job.
University administrators liked Rich because he often worked late, as did the
administrators. Rich also rarely missed work for either illness or vacation. Thus,
the human resources (HR) department did not follow standard hiring procedures
such as checking references. Instead, the HR department approved Rich as the
new Bookstore Manager within days of the previous manager’s departure.
Excitedly, Rich accepted the promotion and even agreed to continue working as
the textbook manager despite the fact he would not be paid for these extra
responsibilities. The Dean of Students, who monitors bookstore operations, felt
this would be a good opportunity for both Rich and the university.
Rich has managed the bookstore for the past three years without any issues,
which has been a relief since you have lost two internal auditors on your team. In
addition, the arrival of your baby 6 weeks early caused you to fall way behind on
regularly scheduled internal audits.
The university is in the process of applying for a loan to fund an expansion.
Several lenders expressed interest in funding the project and requested audited
financial statements. Fortunately, they have agreed to accept internally audited
financial statements in exchange for a 1.25% higher rate of interest.
As a member of the internal auditing team of this public university, you are
responsible for providing the internally audited financial statements. To get
started, you requested a reconciliation of the bank deposits and checks logged in
by Pam Becker, the accounts receivable clerk. You may find the Policies and
Procedures Manual for Accounting & Financial Control and Internal Controls for
Small Organizations useful.
After reviewing the reconciliation for the past quarter, you are in a quandary.
Several retail items from a major supplier are on clearance and the paper trail
leads to a check from the supplier that does not appear on any bank statements.
You recall the previous bookstore manager telling you that in situations where
merchandise is put on clearance, the supplier will often write a check to help
offset bookstore losses.
You decided to call Rich Martin, the bookstore manager. Rich was your stepson
before you divorced his mother twenty-five years ago, but you see no reason to
inform the university of this past relationship. Rich is on his vacation in St.
Thomas, U.S. Virgin Islands, but you are able to contact him via cell phone. Rich
confirms the supplier did send a check, but because he was in a rush to start his
vacation, he failed to deposit the check. However, he does remember locking it in
his desk for safekeeping. Rich said not to worry; he would deposit the check as
soon as he returned from vacation.
There was some nervousness and hesitancy in Rich’s voice that made you
uncomfortable with his explanation. In addition, you know that protection of
assets is a critical responsibility of internal auditors. You may find the Internal
Auditing Handbook and the Risk Based Internal Auditing resources helpful in
completing your investigation. Rich’s hesitancy reinforces your decision to
retrieve and deposit the check. You call the security desk and request that Rich’s
desk be unlocked with the master key. You perform an exhaustive search, but do
not find the check. You did, however, find an envelope in the very back of the
bottom drawer; it contained $80,000 in cash!
After a thorough investigation, the internal audit team determined that most of the
money stolen by Rich is from textbook buy-back programs. It is common
practice for textbook resellers to arrive on campus twice a year (at the end of
each fall and spring semester) to pay wholesale prices to buy back textbooks
faculty members and bookstores no longer need. In his position as the textbook
manager, Rich took full advantage of this opportunity. What remains a mystery is
how Rich could have collected $80,000 from what typically gives rise to a very
small amount of money.
The University had outsourced the operations of the textbook buy-back program
to Booker’s, Inc., a small firm out of Baltimore. Rich was in charge of handling all
interactions with Booker’s, Inc. At the end of each buyback period, Booker’s, Inc.
wrote a commission check to the university for allowing them to conduct the
program on campus. Peter Justen, one of Booker’s representatives who was
also on Rich’s bowling league, hand delivered the checks directly to Rich.
Fortunately, Rich’s favorite daughter-in-law Rebecca Knownott, CPA worked in
the business office of the university. The mother of a young child, Rebecca
chose to work as a bookkeeper even though she was a CPA because she did not
want to work beyond 40 hours per week, which is typically required of CPAs.
Rebecca never questioned Rich when he asked her to cash the checks, claiming
he needed the cash to pay refunds to students for sales returns. Although
Rebecca wondered why the bookstore would have so many refunds, she never
questioned her father-in-law because it would displease her husband and Rich
was paying the childcare expenses for her daughter Tabitha.
In addition, the bookstore sold textbooks to Booker’s, Inc. when professors no
longer needed them. Peter also hand delivered these checks to Rich. Rebecca
cashed the checks for her father-in-law, again without questioning him. For the
last two years, during which Rich served as both the bookstore and textbook
manager, Peter had been paying the university in cash instead of checks. The
total of the missing funds from the buy-back process amounted to $372,586.46,
and the total missing funds for the sale of wholesale texts was $629,482.32.
The checks payable to the university for the Athletic Department’s textbooks
were also given directly to Rich. He never accounted for the checks nor did he
transfer the funds to the Athletic Department. The total of missing funds to the
Athletic Department was $340.520.67.
After Rich received and cashed the checks from Booker’s, Inc., he failed to
record the transactions in the university’s accounting system; keeping the cash
for his own personal use.
III.
Steps to Completion
1. Thoroughly examine the AICPA’s Code of Professional Conduct.
2. Identify all stakeholders in the case and explain what each stakeholder
has at stake. A stakeholder could be an owner, employee, shareholder,
taxing authority, community, investor, etc.
3. List and describe all ethical conflicts in involved in this scenario
4. Write a 20-25 page paper that responds to the following ethical
considerations.
a. Part 0 of the AICPA Code of Professional Conduct refers to
professional conduct of all CPAs. Focus on the following topics
and describe how they relate to the specifics on the case.
i. 0.300.020: Responsibilities
ii. 0.300.030: The Public Interest
iii. 0.300.040: Integrity
iv. 0.300.050: Objectivity and Independence, and
v. 0.300.060: Due Care
b. Part II of the AICPA Code of Professional Conduct: Members in
Business refers to threats that fall into one or more of the following
broad categories. Discuss the threats relevant to the specifics on
the case.
i. Adverse interest threat
ii. Advocacy threat
iii. Familiarity threat
iv. Self-interest threat
v. Self-review threat, and
vi. Undue influence threat
c. The AICPA Code of Professional Conduct discusses safeguards
and defines safeguards as “Safeguards may partially or completely
eliminate a threat or diminish the potential influence of a threat”
(AICPA Code of Professional Conduct, p. 134). Suggest
safeguards that could have mitigated the risk of threats in the case.
d. Include the following appendices:
i. A list of all stakeholders and an explanation of what each
had at stake,
ii. A list of the ethical conflicts associated by specific character
in the case, and
iii. Any other tables, graphs, or lists you deem as necessary.
5. Prepare a recorded presentation (approximately 15 minutes) of your
analysis of the case with justification for all decisions. Be sure to include
which actions were illegal, unethical, and/or in violation of professional
standards.
Include at least one slide that effectively communicates the importance of
ethical conduct and how your behavior as a graduate accounting student
contributes to your overall goal of graduating with a clean academic
record.
6. Complete and submit the UMUC Graduate School Leadership Self
Assessment for Individual Projects to assess the process used, time you
invested, and quality of your depth of concentration and use of critical
thinking skills to complete this project.
IV.
Deliverables
1. Paper written in APA style format including appendices.
2. Recorded Power Point presentation file that includes:
i. Audio enhancement on each slide
ii. Speaker’s notes placed under each slide
3. UMUC Graduate School Leadership Self Assessment for Individual
Projects
…
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