Discuss the examples of ethical problems given at the end of section 1.4. What ethical issues do you see? What do you think the chief accountant, the auditor and the general manager should do?

Data from section 1.4

Ethical issues can arise in just about any area of accounting. Here are some examples, all of them real:

• An enterprise has been sued by a recently fired employee who claims that the dismissed was based on the employee's age, and therefore broke employment laws. The enterprise's general manager denies any impropriety. The enterprise's chief accountant, who personally feels that the former employee's claim is justified, has suggested to the boss that the lawsuit should be mentioned in a note to the financial statements, so that users of the statements will know there is a potential for loss if the former employee wins. The general manager feels that the chief accountant should ignore the lawsuit in preparing the financial statements, to avoid embarrassment and the appearance of admitting guilt. The general manager fears that such an apparent admission could be used against the enterprise in court and so could cause the enterprise to lose the lawsuit. What should the chief accountant do?  While doing an audit, the external auditor learns that the enterprise may have been cheating one of its customers. The customer, who is unaware of this and quite happy with things, is another client of the auditor. The auditor, who is bound by rules of conduct designed to protect the confidentiality of information gained during the audit, knows that saying anything to anyone could result in major lawsuits. Should the auditor just keep quiet about what was found? A third enterprise's general manager is paid a bonus each year, calculated as a percentage of profit. The general manager is considering a proposed change of depreciation method that will reduce depreciation expense and therefore raise accrual profit and increase the general manager's bonus. Should the general manager refuse to implement the accounting change, request that the bonus calculation ignore the change, or just go ahead and enjoy the higher bonus?