I. Title: Two Short Case Studies in Staff Auditor and Student Ethical Decision
Making
II. Introduction:
Competencies All graduate accounting course deliverables use the AICPA PreCertification Core Competency Framework to assess competencies deemed
essential for success in the accounting profession.
Competencies assessed by this project:
Research
o Identify relevant professional frameworks, standards, and governing
bodies.
Ethical conduct and Professional behavior
o Demonstrate knowledge of ethical principles and professional
behavior for the protection of society related to the AICPA Code of
Professional Conduct, which includes Continuing Professional
Education (CPE), and other professional codes of ethics.
Decision-making
o Propose effective business decisions based on analysis and
professional judgment.
Communication
o Communicate clearly in writing and speaking, meeting expectations
for content, purpose, organization, audience, and format, especially
APA Style.
Scenario:
Before applying for your dream job upon graduation, you decided it is wise to
apply for a paid internship first. You are hoping to use what you learn in the
internship to apply for a full-time job at a local CPA firm. Fortunately, UMGC’s
Career Services team has a list of local firms seeking interns.
After reviewing the list of potential employers, you select and apply for an
internship with the Annapolis Center for Applied Ethics. The interview went so
well, you were hired on the spot! Your first assignment is to prepare two reports
for the Director of the Annapolis Center for Applied Ethics. One report will focus
on an ethical dilemma facing a business. The other focuses on a student’s
decision when faced with a different ethical dilemma.
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062212 Last updated by Sharon L. Levin
III.
Steps to Completion
Step 1: Thoroughly read this project file and the Two Short Cases in Staff Auditor
and Student Ethical Decision-Making case study before beginning to work on this
project.
Step 2: Research the AICPA Code of Professional Conduct, Auditing Standards on
the PCAOB Website, and UMGC Policy 150.25: Academic Integrity to answer all
questions in the case study file.
Step 3: Prepare your report in MS Word using strict APA Style.
IV.
Deliverables
Word document 6-8 pages in strict APA format.
V.
Rubric – the rubric is located in Learning Resources>Assessments:
Projects
VI.
Helpful hints:
Read the grading rubric before beginning the project to fully
understand the requirements; ask questions about the requirements
if needed.
Read the case study until you fully understand it.
The case study may not provide some information that is needed to
make a definitive decision on every issue. Use your professional
judgment when necessary and state any assumptions you may have
used.
Submit the deliverables on or before the due date.
Ask your professor questions as needed.
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062212 Last updated by Sharon L. Levin
ISSUES IN ACCOUNTING EDUCATION
Vol. 33, No. 1
February 2018
pp. 45–52
American Accounting Association
DOI: 10.2308/iace-51881
Two Short Case Studies in Staff Auditor and Student Ethical
Decision Making
Christine Cheng
Louisiana State University
Renee Flasher
Ball State University
ABSTRACT: Two cases help students identify the influence that self-interest can have on ethical decision making
and encourage them to practice ‘‘giving voice to values.’’ The learning objectives are to: (1) increase student
awareness of the role of ethical fading in unethical decision making; (2) develop critical-thinking skills for ethical
decision making; and (3) practice applying moral imagination to resolve ethical dilemmas. Specifically, we designed
these case scenarios to develop skills in recognizing and resolving ethical dilemmas. Post-case survey responses
indicate that beyond meeting the learning objectives, students personally relate to the protagonists. The cases are
appropriate for graduate or undergraduate accounting courses, including capstone accounting courses, in which
ethics, auditing, forensic accounting, and/or the professional code of conduct are discussed. Implementation
guidance and Teaching Notes are provided to aid instructors seeking to motivate in-class discussions of the current
and future ethical decisions students may face.
Keywords: ethics; self-interest; Giving Voice to Values; PCAOB inspection; test banks; critical thinking.
CASE
A
s you read the two case scenarios below, consider the decisions made by Johnny and Mary Jo and the resulting
outcomes. What influences their decision-making? What sanctions, if any, should Johnny or Mary Jo face? Assuming
that both protagonists wanted to act ethically, what could they have done differently? Would that change the
outcomes? If so, how?
Professional Scenario
Johnny, a certified public accountant (CPA) who is acting as the in-charge/senior on the audit engagement, works on the
ABC Company audit, an existing firm client.1 Johnny works hard to complete this engagement along with his other
engagements during the Spring busy season. The following Fall, the Public Company Accounting Oversight Board (PCAOB)
notifies the firm of the inspection visit timing, scheduled in a little over two weeks, and the selection of ABC Company’s work
papers.
Knowing that the PCAOB would be arriving soon to examine the ABC Company audit work papers, the manager and the
partner review the work papers and refresh themselves on the details of the engagement. Johnny receives an email from the
We appreciate the insightful comments received from Kelsey Brasel, Larry Crumbley, Jacquelyn Moffit, Pradeep Sapkota, and an anonymous reviewer for
the 2016 Accounting and Information Systems Conference, as well as the editor, associate editor, and two anonymous reviewers from Issues in Accounting
Education. All remaining errors are our own. Christine Cheng gratefully recognizes the support she received from the Donald and Velvia Crumbley
Professorship.
Editor’s note: Accepted by Valaria P. Vendrzyk.
Submitted: March 2016
Accepted: July 2017
Published Online: August 2017
1
Although this scenario is based on real events as described in PCAOB Enforcement Release No. 105-2012-008 (PCAOB 2012), the names have been
changed.
45
Cheng and Flasher
46
manager with a request for the paper version of the work papers from the file room. Johnny delivers the work papers to the
manager’s office the Friday prior to the inspectors’ arrival on Monday.
On Friday, Johnny and the manager determine that the file is incomplete with respect to two key documents: a supporting
worksheet for a key item and a final version of the signed engagement letter. Johnny reviews the work papers and cannot find
the supporting worksheet. However, he does find an earlier version on his computer hard drive. At the manager’s direction, he
prints out the worksheet on Friday. On Monday morning, Johnny adds the tick marks, initials, and backdates the work paper.
This work paper is added to the file without any explanation for the late addition or the actual date it is added to the file.
Firm policy requires a signed engagement letter for all audits. The manager notes that the audit work papers do not contain
an engagement letter that includes an original client signature. The manager contacts the client and requests that Johnny follow
up to obtain the document. Johnny exchanges emails with the corporate controller and arranges to have the letter delivered prior
to 8:30 a.m. on the day of the inspectors’ arrival. The letter is inserted into the hard copy documents on Monday morning
without documenting the true date of insertion or the reason why it is added. Johnny takes the completed, revised work papers
and delivers them to the PCAOB inspectors when they arrive.
Student Scenario
Mary Jo and Samantha discuss an exam for their hardest class this semester, Accounting 355. As they leave Tuesday’s
lecture, Mary Jo complains to her friend, Samantha, that she did not want to fail the exam but she felt too tired to study anymore
as this was her third exam this week. Samantha asks Mary Jo if she wants the test bank to study. Samantha proclaims that she
has earned almost all As since she started using the test banks as study aids. Knowing that she is running out of time prior to the
exam date and that the exam grade will significantly impact her final grade for the course, Mary Jo downloads the test bank for
the textbook from the website Samantha gave her and uses it as a study aid. The test bank’s cover page clearly states that the
document is only for ‘‘instructor use’’ and contains a copyright notice at the bottom of each page.
On the exam, the instructor requires students to sign a certification that they are aware of the academic integrity code of
their institution and the academic integrity policies set forth on the syllabus. Also, they must certify that they have no
knowledge of violations of either the code or the class policy by themselves or other students. Mary Jo signs the certifications
and does very well on the test.
DISCUSSION QUESTIONS2
Apply the following ethical framework to each scenario:
1. What standards and principles of ethics did Johnny and Mary Jo violate? Should Johnny be sanctioned by the firm or
the PCAOB? If so, how? Should Mary Jo be sanctioned by the university office responsible for ensuring academic
integrity? If so, how?
2. Who are the main stakeholders in each situation aside from Johnny and Mary Jo? How might each of these stakeholders
be affected by Johnny’s and Mary Jo’s choices, respectively?
3. How might Johnny and Mary Jo rationalize their behavior as acceptable?
4. What alternative actions would you recommend for Johnny and Mary Jo?
5. Johnny and Mary Jo both failed to speak up when confronted with their ethical dilemmas. What factors contributed to
their silence? Assume that they wanted to act ethically. How could they have given voice to their concerns?
REFERENCES
Langenderfer, H. Q., and J. W. Rockness. 1989. Integrating ethics into the accounting curriculum: Issues, problems, and solutions. Issues
in Accounting Education 4 (1): 58–69.
Public Company Accounting Oversight Board (PCAOB). 2004. Audit Documentation. Auditing Standard (AS) No. 1215. Release No.
2004-006. Washington, DC: PCAOB.
Public Company Accounting Oversight Board (PCAOB). 2012. Order Instituting Disciplinary Proceedings, Making Findings, and
Imposing Sanctions: In the Matter of Dale Arnold Hotz, CPA, Jyothi Nuthulaganti Manohar, CPA and Michael Jared Fadner,
CPA, Respondents. Release No. 105-2012-008. Washington, DC: PCAOB.
U.S. House of Representatives. 2002. The Sarbanes-Oxley Act of 2002. Public Law 107-204 [H.R. 3763]. Washington, DC: Government
Printing Office.
2
We thank an anonymous reviewer for suggesting modifications to the discussion questions. We adapt the discussion questions from Langenderfer and
Rockness (1989).
Issues in Accounting Education
Volume 33, Number 1, 2018
Two Short Case Studies in Staff Auditor and Student Ethical Decision Making
47
APPENDIX A
Background on PCAOB Inspections
The Sarbanes-Oxley Act of 2002 (U.S. House of Representatives 2002) established the PCAOB, an independent oversight
board for public accounting firms tasked with improving audit quality. One of the PCAOB’s many functions in the current audit
environment is to inspect the work papers of audit firms that audit companies listed on United States-based exchanges. PCAOB
inspectors use a risk-based approach, not a statistically based sampling approach, to review the supporting documentation for
an independent auditor’s opinion for selected clients or engagements. The supporting documents, referred to commonly as
work papers, are either in paper or computerized/electronic form. The inspectors may provide the audit firm with advance
notice of the particular engagements selected for inspection.
Audit firms are responsible for maintaining the supporting documentation for their audit opinions in accordance with the
Auditing Standards (AS). The following three requirements set forth in AS 1215 (formerly, AS 3 Audit Documentation,
PCAOB 2004) are pertinent to the professional scenario. First, auditors must complete the supporting working papers for an
opinion within 45 days following the issuance of the opinion. Second, no documentation should be deleted or discarded after
this 45-day window has expired. Finally, anything added to the file after the 45-day window must be appropriately dated and
include both an explanation of why it was added and who added it.
Issues in Accounting Education
Volume 33, Number 1, 2018

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