EXAMPLE 2.2 Keep on Trucking - First case

An entrepreneurial spirit, Jack Davis had moved out of his parents' home at the age of 20, and into theirgarage. He had successfully lobbied the local council to have the garage re-designated as a subplot ofhis parents' house, and hence a separate address: '303a'. As the area had mixed zoning, Jack began tostart a number of businesses. A voracious consumer of social media and online material, he was quick toknow what businesses might become fashionable, and set about creating low-cost start-ups, gatheringthe requisite rights, and then selling them on.Having gained sufficient capital in these ventures, Jack began his own 'bricks and mortar' business,a Texas BBQ restaurant that would be delivered solely via food trucks. He refitted the unzoned '303a'address as a smokehouse kitchen and bought two ageing trucks. Running a comprehensive social mediapromotion for the business, Jack soon attracted investment, and decided to grow the business and seekpartnerships. Gil White, a friend who had recently completed his CPA, bought one of three 20 per centstakes in the business and took over finance and accounting for the business.Over the next six months the business expanded; Jack and Gil bought and refitted three more trucksand took on several employees. At the end of this period, Jack prepared a memorandum for the partners,recommending that they sell the business, as interest was high and they could probably net a considerableprofit. Gil was a little surprised, as the business seemed to be growing healthily. He asked Jack if it wasthe best time to sell, and whether perhaps they should hang on to the business for another year or so.Jack revealed that he'd heard rumours that there were plans to restrict the movements of food trucks,heavily pushed by local restaurant owners who were feeling the pinch of the competition. This would likelyimpact the company's viability in its expanded state. Gil realised that Jack was probably right, and thatexiting the business was the prudent move. Jack asked Gil to prepare the projected estimates in order tobegin the process of courting buyers. Gil pointed out that the estimates would depend heavily on whetherthe council restricted food truck operations. Jack asked Gil to make no mention of the council plans, asnothing was yet official, and few people were aware of the rumours. Jack had been closely monitoring localgovernment planning since having the garage re-designated. Furthermore, if they projected a downturnin revenue then they would likely make a severe loss on the sale.

EXAMPLE 2.3 Sustainable Distribution - Second Case

Dwyer worked as an auditor for several companies, but one source of regular work was a timberdecking business, Sustainable Solutions, an intergenerational family business now managed by two highschool friends. Jane also worked as a personal accountant for the two managers. A married couple,Joe and Debbie Frazer, ran the company together after Joe's father had retired from the position, untilDebbie largely retired to raise their two children. After steadily growing the business over more than adecade, Joe and Debbie separated due to growing marital difficulties. In the following year Joe decidedto significantly expand the business, proposing the acquisition of a second distribution centre and toexpand the company's fleet of light trucks, and sought Jane's assistance in signing off on the proposal.Jane looked at Joe's projected estimates and was not convinced. The proposal required significantoutlay on infrastructure, much of which would be borrowed against the value of the business. WhileSustainable Solutions maintained a constant client base, it was not clear that they could expand thisbase proportionally to Joe's proposed business expansion. Jane suspected that the move was intended toPdf_Folio:5454Ethics and GovernanceembedSustainableSolution'scurrentrevenueinthenewventurefortheforeseeablefuture.Shesuspectedthat Joe probably feared that a divorce may be imminent, involving a subsequent division of assets. Bytaking on this debt, Joe could probably delay any division of revenue or company assets with Debbie.Jane felt she had a duty to Debbie as much as Joe

Read examples 2.2 and 2.3 and complete the following.

(a) Briefly summarise the ethical dilemmas that Gil and Jane face.

(b) For each of these dilemmas, state which of Kidder's four categories summarises the problem.

(c) Describe two courses of action that each accountant may take