Ethics Paper

ONE

a. What course of action would you have suggested to Ren at the moment he learned of the material misstatement on the 2009 financial? State your reasoning by employing the utilitarian and deontological models.

When Ren found out about the material misstatements on the 2009 financial statements, he should have reported it immediately to his audit engagement team. This decision would have benefited the users of the financial statements. The client would have had to issue a qualified opinion, instead of an unqualified opinion, because the prior year financial statements would have needed to be restated due to the material misstatements. The client needed to take the hit, rather than the users of the financial statements, because it produces the “greatest happiness for the greatest number” (Ethics Outline). This decision follows the model of Utilitarianism. Reporting the material misstatements immediately might not benefit Ren and his engagement team, but the decision does follow the deontological model by upholding his duty as an auditor, and it does not “treat others as means that exist to serve our purposes” (Ethics Outline). Therefore, providing users with reasonably …show more content…
This act is a shift of a loss between two adjacent years, which is illegal because it fraudulently mispresents Cobbs’ financial statements to the financial users. Since Ren agreed to shift the losses to protect his reputation, fraud occurred because “fraud exists only when a person represents as a fact something he or she knows to be untrue” (Miller, 8-2g). Cobb misled his financial users by encouraging Ren to misrepresent its financial statements, and Ren falsely declared the financial statements as fairly stated when he knew material misstatements existed. Therefore, shifting losses between adjacent years is a fraudulent misrepresentation, which is ethically wrong and