...Case 2-8 Juggyfroot This case shows the auditors resisting pressure from the client to change to a non justified accounting treatment. The stakeholders of this case are the bank, the shareholders, creditors, suppliers, employees, and officers of the firm. The stakeholders expect non-misleading financial statements. Deziloo has an obligation to perform the audit with integrity, objectivity, and due professional care. From a rights perspective, it is not right to mislead the investors by making it look as though the company is doing better than it really is. Any attempt to intentionally misstate the financial statements violates the categorical imperative. From a justice perspective, stakeholder interests are not fairly represented because the perceived interests of the management are given priority over the interest of all other stakeholders. From a utilitarian perspective, Rule-utilitarianism requires that the correct rule should be followed. Act-utilitarianism requires that the act that creates the greatest good for the greatest number of stakeholders should be selected. None of the stakeholders benefit from an action that misstates net income. From a virtue perspective, honesty requires that the statements should be truthful and recognize revenue using generally accepted accounting principles. Objectivity requires that the company should approach its decision about the proper asset classification with fair-mindedness and without partially to one set of stakeholders....
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...Case 2-8 Juggyfroot “I’m sorry, Lucy. That’s the way it is,” Ricardo Rikey said. “I just don’t know if I can go along with it, Rikey,” Lucy replied. “We have no choice. Juggyfroot is our biggest client, Lucy. They’ve warned us that they will put the engagement up for bid if we refuse to go along with the reclassification of marketable securities,” Rikey explained. “Have you spoken to Fred and Ethel about this?” Lucy asked. “Are you kidding? They’re the ones who made the decision to go along with Juggyfroot,” Rikey responded. The previous scene took place in the office of Deziloo LLP, a large CPA firm in Beverly Hills, California. Lucy Spheroid is the partner on the engagement of Juggyfroot, a publicly owned global manufacturer of pots and pans and other household items. Ricardo Rikey is the managing partner of the office. Fred and Ethel are the two members of the firm that make final judgments on difficult accounting issues, especially when there is a difference of opinion with the client. All four are CPAs. Ricardo Rikey is preparing for a meeting with Norman Baitz, the CEO of Juggyfroot. Rikey knows that the company expects to borrow $5 million next quarter and it wants to put the best possible face on its financial statements to impress the banks. That would explain why the company reclassified a $2 million market loss on a trading investment to the availablefor- sale category so that the “loss” would now show up in stockholder’s equity, not as a...
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...Case 2-8 Juggyfroot “I’m sorry, Lucy. That’s the way it is.” Ricardo Rikey said. “I just don’t know if I can go along with it, Rikey.” “We have no choice. Juggyfroot is our biggest client, Lucy. They’ve warned us that they will put the engagement up for bid if we refuse to go along with the reclassification of marketable securities.” “Have you spoken to Fred and Ethel about this?” Lucy asked. “Are you kidding? They’re the ones who made the decision to go along with Juggyfroot,” Rikey responded. The previous scene took place in the office of Deziloo LLP, a large CPA firm in Beverly Hills, California. Lucy Spheroid is the partner on the engagement of Juggyfroot, a global manufacturer of pots and pans. Ricardo Rikey is the managing partner of the office. Fred and Ethel are the two members of the firm that make final judgments on difficult accounting issues especially when there is a difference of opinion with the client. All four are CPAs. Ricardo Rikey is preparing for a meeting with Norman Baitz, the CEO of Juggyfroot. Rikey knows that the company expects to borrow $5,000,000 next quarter and it wants to put the best face possible on its financial statements to impress the banks. That would explain why the company had reclassified a $2,000,000 market loss on a trading investment to the available-for-sale category so that the “loss” would now show up in stockholder’s equity and not as a charge against current income. The result was to increase...
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...Ethical Obligations and Decision Making in Accounting Text and Cases Steven M. Mintz, DBA, CPA Professor of Accounting California Polytechnic State University, San Luis Obispo Roselyn E. Morris, PhD, CPA Chair and Professor of Accounting Texas State University-San Marcos Boston Burr Ridge, IL Dubuque, IA Madison, Wl New York San Francisco St. Louis Bangkok Bogota Caracas Kuala Lumpur Lisbon London Madrid Mexico City Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto Table of Contents Chapter 1 Integrity: The Basis for Ethics in Accounting 1 What Is Ethics? 1 Definition 1 Application of Ethical Reasoning in Accounting DigitPrint Case 33 32 Conclusion 34 Discussion Questions 34 Endnotes 36 Chapter 2 Cases 37 2 Case 2-1: A Faulty Budget 38 Case 2-2: Better Boston Beans 39 Case 2-3: Eating Time 40 Case 2-4: Is Internal Whistle-Blowing "Right"? Case 2-5: Play Ball 43 Case 2-6: Supreme Designs, Inc. 44 Case 2- 7: The City of West Buckle 46 Case 2-8: The CPA Review Course 47 Case 2-9: The Ethics ofiPod-ing 48 Case 2-10: The Tax Return 49 Distinguishing between Ethics and Morality Religious and Philosophical Foundations of Ethics 3 Teleology 4 Deontology 6 41 Acting with Integrity Personal Integrity 8 7 The Moral Point of View 7 The Six Pillars of Character.... 8 Trustworthiness 8 Respect 10 Responsibility 10 Fairness 11 Caring 11 Citizenship 12 Chapter 3 Ethical Decision Making in Business 50 What Is Business Ethics...
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