QP Case Analysis

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QP Case Analysis

• Grant Lin Rajan Raval

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Project Overview

• Problem
• Criteria for Analysis
• Ethical Issues
• Courses of Action
• Recommendations
• Conclusion

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Problem

• Beta has falsified financials
• Jamess situation
• Personal Relationship vs. Professionalism
• Personal relationship jeopardizes the audits
  independence and objectivity

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Criteria for Analysis

• Solution must
• Comply with proper accounting principles and
  ethics
• Seek to minimize total loss for all stakeholders

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3 Ethical Considerations

• Integrity and Objectivity
• Personal / Business Relationships
• Practice and Client Conflicts of Interests

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Integrity and Objectivity

• Standards of Professional Ethics -1.200
• - members should have regard to factors which
  reflect adversely upon integrity and
  objectivity
• Jamess approach to audit depends on standards
• - Safe, objective execution, reputation upheld
• - Integrity compromised, AP in danger

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Personal / Business Relationships

• Standards of Professional Ethics -1.203
• - close personal or business
• relationships can affect objectivityensure
• objectivity not endangered
• Conflict of Interest between James and Alfred
• - Both companies and personal relationship
• in balance

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Practice / Client Conflict of Interest

• Standards of Professional Ethics -1.203
• a practice should not continue an engagement in
  which there is a significant conflict of interest
  between parties
• Jamess position
• - Bring AP into a volatile situation?
• - Rescind Betas chances for a GEM position?

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Monetary Issues

• Money is the deciding factor in
• unethical business decisions
• Jamess current situation
• - Partner track
• - Landed large client and leadership role in
• Beta audit
• Clean audit
• - Company will lose large potential revenue
• - Losing Beta may impede Jamess upward
• track through AP

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Courses of Action

• There are two courses of action
• Choice Approach
• Upholds Jamess responsibility to his profession
  and friendship
• Blind Approach
• Short-term gains yield long-term losses

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Choice Approach

• Jamess Auditing Process
• Audit with utmost integrity and independence
• Provide complete review of accounting records
• Alfreds Decision
• Fix accounting records before audit commencement,
  or
• Submit falsified accounting records

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Consequences of Choice Approach

• If Alfred chooses to fix
• Receive unqualified auditing opinion
• Expose Betas slow growth and losses
• Beta loses opportunity to list on GEM
• If Alfred chooses to submit falsified records
• Receive adverse auditing opinion
• Receive market and investor shock
• Beta loses opportunity to list on GEM

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Blind Approach

• Jamess Auditing Process
• Not disclose the facts
• Show only good results to attract more investors
• Consequences
• Beta will gain listing on the GEM
• Receive additional capital financing
• Alpha will receive additional revenue
• James may receive promotion
• Accounting scandal, economic turmoil, bankruptcy,
  criminal indictment

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Recommendations

• The Choice Approach satisfies the
• criteria of proper accounting and
• minimizing total loss
• Doubtful accounting practices and ethical
  dilemmas are eliminated
• Avoids consequences of Blind Approach
• Economic turmoil, financial repercussions,
  criminal indictment
• Alfred should fix accounting errors and provide
  full disclosure
• Ensures legitimate use of auditing costs and an
  unqualified audit opinion

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Conclusion

• It is impossible for all businesses
• to succeed
• Financial success is determined by the ability to
  generate profits and increase shareholder value
• Alfreds desire is noble, his methods were not
• For accounting to truly reflect the financial
  status of a business
• Ethics
• Objectivity
• Independence
• must be upheld

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The End
Thank you for your time