Professional Scenario and Ethical Violations
1). From the provided case studies, it can be observed that both Johnny and Mary Jo have violated specific standard and ethical principle; they are discussed below:
As per the professional scenario, it can be observed that the work paper of ABC Company lacks two documents; they are worksheet of a key item and final version of the signed engagement letter. Thus, as per the direction of the manager, Johnny puts one earlier version of the worksheet in the file. He also puts the audit engagement letter in the file without documenting the truer date and explanation. By this action, Johnny violates the PCAOB principle of Auditing Standard (AS) 1215, formerly known as AS 3, Audit Documentation (Andiola, Lambert and Lynch 2018).
As per the student scenario, Mary Jo downloads the test bank from the site provided by Samantha that was only for the use of instructor. However, at the exam hall, she signs the certificate of academic integrity code of their institution and the policies for academic integrity. Thus, with this specific action, Mary Jo violates the principle of integrity of their organization.
In this context, it needs to be mentioned that PCAOB should sanction Johnny for their specific actions that contributes towards the violation of AS 1215 (Murphy and Smith 2017). As this is a major violation, PCAOB should penalize Johnny by removing him from the audit operation of ABC Company and to suspend him from providing professional services for a specific period.
In case of Mary Jo, the university needs to sanction her for the violation of integrity principle for the code of the institute. For this reason, the institute should penalize Mary Jo by not allowing her to sit for the exam as a result of major ethical violations. Apart from this, the institute should suspend Mary Jo from attending the classes of the university for specific period. These are the major ways for sanctioning Johnny and Mary Jo.
2). It needs to be mentioned that provided situation of ethical violation have major negative affects on some of the major stakeholders. In case of the professional scenario, the major stakeholders apart from Johnny are the investors of ABC Company, the audit firm and the managers. In case of the student scenario, the major stakeholders apart from Mary Jo are Samantha, the university and the other students.
Due to the inclusion of earlier version of the worksheet, the financial statements of the company will not be able to reflect the correct financial situation. It will mislead the investors as they will not be able to make correct-investment decisions that lead to less return on investments. After that, the involvement of the manager can be seen with Johnny. Thus, the reveal of the scenario will affect the job and position of the manager. At the same time, the reveal of this scenario will also affect the goodwill of the audit firm (Lienert, Schnetzer and Ingold 2013).
In case of the student scenario, Samantha is a major stakeholder apart from Mary Jo as she will be subjected to the same punishment like Mary Jo by the institute as she asked Mary Jo to use the test bank for getting easy marks. The whole situation will affect the other students due to the fact that will not be able to get good marks like Mary Jo by complying with the code of ethics of the university. Apart from this, the revelation of this incident will affect the goodwill of the university (Missonier and Loufrani-Fedida 2014).
Student Scenario and Ethical Violations
3). Both Johnny and Mary Jo have their reasons to rationalize their behavior as acceptable. For Johnny, one of the major reasons for their behavior is to save his profession from any kind of legal actions from PCAOB. In case PCAOB finds that faults in the audit papers that are the absence of worksheet and final version of signed engagement, they can penalize Johnny in various ways. Apart from this, another major reason for this behavior of Johnny is the direction of the manager of the company as it is the responsibility of the employees to comply with all the orders of their managers. Thus, by providing these reasons, Johnny can rationalize his specific behavior (Knechel and Salterio 2016).
Like Johnny, Mary Jo also has her own reason to rationalize her behavior. The main reason for Mary Jo is to do well in the exam. As per the provided situation, Mary Jo is tired due to her long exam schedule and thus, she is feeling too tired for the study. At the same time, she does not want to fail in the examination. Thus, in the presence of all these reasons, Mary Jo takes the decision of using test bank. Hence, this is the main reason for Mary Jo to rationalize her behavior (Chan 2014).
4). In this context, some major recommendations can be provided to both Johnny and Mary Jo related to their specific actions and behavior; they are discussed below:
In case of Johnny, the major recommendation is to comply with all the regulations and principles of PCAOB, AS 1215 for audit documentation. Be specifically, Johnny is recommended to take certain actions. First, it is recommended to Johnny to provide proper explanation for the addition of the work paper of earlier version. The main reason behind providing the expiation is to make it easy for PCAOB to understand the working paper for ABC Company. Apart from this, it is also recommended to Johnny to arrange all the required documents at one place so that they can be easily presented to the author of PCAOB at the time of visiting (Li et al. 2017).
In case of Mary Jo, the major recommendation to Mary Jo is to comply with the integrity code of the university along with the academic integrity policies on the syllabus. More specifically, it is needed for Mary Jo not to download the test paper from the website provided by Samantha as the test papers are only for the use of instructors. At the same time, it is also recommended to Mary Jo that she should study hard for her exam so that she should be able to obtain good marks in the exams (Frederickson and Ghere 2014).
5). There are some major factors contributed towards the silence of both Johnny and Mary Jo and they are discussed below:
In case of Johnny, he remained silence due to the instruction of the managers to take those specific actions. Apart from this, he also remained silence in order to save his job so that PCAOB does not penalize him. In case of Mary Jo, the main reason behind her silence is to do well in the examination as she does not want to fail in the examination. These are the major reasons for both Johnny and Mary Jo remained silence.
In case both Johnny and Mary Jo wanted to act ethically, they were required to certain actions; they are discussed below:
In case of Johnny, he was required to protest the decision of the managers to add the worksheet in the file without any explanation and date. Apart from this, he could have raised the issue to PCAOB and seek help from (Hartman, DesJardins and MacDonald 2014).
In case of Mary Jo, the main way to voice their concern was to deny the proposal of Samantha. At the same time, she could have raised the issue to the ethical board of the university in order to stop downloading test papers from the site (Erhard, Jensen and Zaffron 2016).
References:
Andiola, L.M., Lambert, T.A. and Lynch, E.J., 2018. Sprandel, Inc.: Electronic Workpapers, Audit Documentation, and Closing Review Notes in the Audit of Accounts Receivable. Issues in Accounting Education.
Chan, R., 2014. Ethics in education.
Erhard, W., Jensen, M.C. and Zaffron, S., 2016. Integrity: A Positive Model that Incorporates the Normative Phenomena of Morality, Ethics, and Legality–Abridged (English Language Version).
Frederickson, H.G. and Ghere, R.K., 2014. Ethics in public management. Routledge.
Hartman, L.P., DesJardins, J.R. and MacDonald, C., 2014. Business ethics: Decision making for personal integrity and social responsibility. New York: McGraw-Hill.
Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk. Taylor & Francis.
Li, C., Raman, K.K., Sun, L. and Wu, D., 2017. The effect of ambiguity in an auditing standard on auditor independence: Evidence from nonaudit fees and SOX 404 opinions. Journal of Contemporary Accounting & Economics, 13(1), pp.37-51.
Lienert, J., Schnetzer, F. and Ingold, K., 2013. Stakeholder analysis combined with social network analysis provides fine-grained insights into water infrastructure planning processes. Journal of environmental management, 125, pp.134-148.
Missonier, S. and Loufrani-Fedida, S., 2014. Stakeholder analysis and engagement in projects: From stakeholder relational perspective to stakeholder relational ontology. International Journal of Project Management, 32(7), pp.1108-1122.
Murphy, M.L. and Smith, M.O., 2017. How to Audit Fair Value Measurements: A New Framework for Valuation Professionals Can Help Practitioners in This Challenging Area. Journal of Accountancy, 224(6), p.32.
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