\u00a0\u00a0
\nAssume Ethan Lester and Vick Jensen are CPAs. Ethan was seen as a “model employee” who deserved a promotion to director of accounting according to Kelly Fostermann, the CEO of Fostermann Corporation, a Maryland-based, largely privately held company that is a prominent global designer and marketer of stereophonic systems. The company has an eleven person board of directors.
\nKelly considered Ethan to be an honest employee based on performance reviews and his unwillingness to accept the promotion, stating that he wasn’t ready yet for the position. Kelly admired his willingness to learn and grow, not just expect a promotion. Little did she know that Ethan was committing a $50,000 fraud during 2018 by embezzling cash from the company. In fact, no one seemed to catch on because Ethan was able to override internal controls. However, the external auditors were coming in and to solidify the deception, he needed the help of Vick Jensen, a close friend who was the accounting manager and also reports to Ethan. Ethan could “order” Vick to cover up the fraud but hoped he would do so out of friendship and loyalty. Besides, Ethan knew Vick had committed his own fraud two years ago and covered it up by creating false journal entries for undocumented sales, returns, transactions, and operating expenses.
\nEthan went to see Vick and explained his dilemma. He could see Vick’s discomfort in hearing the news. Vick had thought he had turned the corner on being involved in fraud after he quietly paid back the $20,000 he had stolen two years ago. Here is how the conversation went.
\n“Vick, I need your help. I blew it. You know Mary and I split up 10 months ago.”
\n“Yes,” Vick said.
\n\u201cWell, I got involved with another woman who I tried to impress by buying her things. I wound up taking $50,000 from company funds.\u201d
\n\u201cEthan, what were you thinking?\u201d
\n\u201cDon’t get all moral with me. Don\u2019t you recall your own circumstances?\u201d
\nVick was quiet for a moment and then asked, \u201cWhat do you want me to do?\u201d
\n\u201cT need you to make some entries in the ledger to cover up the $50,000. I promise to pay it back, just as you did. You know I\u2019m good for it.\u201d
\nVick reacted angrily, saying, \u201cYou told me to skip the bank reconciliations\u2014that you would do them yourself. I trusted you.\u201d
\n\u201cI know. Listen, do this one favor for me, and I\u2019ll never ask you again.\u201d
\nVick grew increasingly uneasy. He told Ethan he needed to think about it… his relationship with the auditors was at stake.
\n1. Identify the stakeholders in this case and their interests. Give one example where their interests may coincide, and one example where there may be in conflict.
\n2. According to the Fraud Triangle depicted in chap 5 of the textbook, what are the pressures or incentives facing Vick Jensen? What opportunity does he have to commit fraud? What rationalizations is he likely to consider?
\n3. \u00a0Describe the ethical and professional responsibilities of Vick Jensen by applying Exhibit 3-11 from the textbook to the case. What concrete steps does he need to take?
\n4. \u00a0If Jensen agrees to go along with Lester\u2019s request, which provisions of the AICPA code of conduct and the IMA Statement of Ethical Professional Practice (see the most recent version for the IMA at https:\/\/www.imanet.org\/-\/media\/b6fbeeb74d964e6c9fe654c48456e61f.ashx) will he be violating? What does Jensen stand to lose?
\n5. Assume you are Jensen and you decide not to cooperate with Lester\u2019s request. Using the Giving Voice to Values technique (see Mintz & Morris chap 2), write a dialogue between you and the person whom you selected to discuss this situation. Include the following elements in your dialogue:
\n\u2022 What do you need to say, to whom, and in what sequence?
\n\u2022 What will the objections or pushback be?
\n\u2022 What would you say next? What data and other information do you need to make your point and counteract the reasons and rationalizations you will likely have to address?<\/p>\n","protected":false},"excerpt":{"rendered":"
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