Step $3$: Being Responsible with the Responsibilities Lens

Part $1$Act with Courage

Just to review...we've determined that you have the following duties owed your stakeholders in this problem:

Duty to protect the business relationship between K&R and G$-$BioSport.

Duty to the client, G$-$BioSport, to use independent professional judgment in accordance with established principles of accounting and auditing practice.

Duty to raise your concerns about the potential lack of independence in the conduct of the audit.

Duty to give G$-$BioSport an opportunity to justify the mark$-$to$-$market valuation.

In addition to these duties, an ideal option for the Responsibilities Lens will be reversible. The reasons behind your action should be reasons you would willingly accept as ethical if you were on the other side of the decision.

Of the six options listed below, one of them is an ethically mature action using the criteria of the Responsibilities Lens, one is ethically acceptable, and one represents an ethically immature action. The other three options define ethical behavior through the perspective of the Results Lens, which we'll explore next.

Best Option: An ethically mature option is one where your reason for acting is consistent with your duties. In addition, the option should treat the other stakeholders with care and respect.

Good Option: A good ethical option is one where you meet your responsibilities to the stakeholders.

Poor Option: A poor ethical option is one where you think only of yourself.

I've made a list of what I think are the possible choices in this situation. Considering your duties to the stakeholders, choose the option that you think is the most ethical using the principles and values of the Responsibilities Lens.

Which option best fulfills your duties?

$$Option $1$

Arrange a meeting with G$-$BioSport's CFO to discuss your concerns about the mark$-$to$-$market valuation. To show some respect for his side, give him and his staff an opportunity to explain their justification for their valuation before reporting an exception to the valuation.

$$Option $2$

Arrange to be replaced as audit partner for this audit so that you will not have to deal with the mark$-$to$-$market valuation issue.

$$Option $3$

In order to help G$-$BioSport be the best it can be$,$ obtain a detailed report from the field audit staff that explains why the valuation is overstated and not supported by relevant accounting principles. Submit that report to K&R$$s managing partner and G$-$BioSport$$s CFO with a memo concurring in that conclusion.

$$Option $4$

Arrange a meeting with the managing partner to express your concerns about the propriety of the mark$-$to$-$market valuation and your intention to take exception to it$.$ Also, request from the managing partner assurance of his support for this finding to cover for yourself.

$$Option $5$

In order to protect yourself, arrange to be replaced as audit partner for this audit so that the mark$-$to$-$market valuation issue is handled by another member of the firm. Then, speak with that person to inform him or her of your concerns about the propriety of the valuation and the efforts of G$-$BioSport$$s CFO and K&R$$s managing partner to adversely influence the independence of the audit.

$$Option $6$

Because the rules are clear, send a memo to K&R$$s managing partner outlining the relevant facts about G$-$BioSport$$s mark$-$to$-$market valuation, the effort by G$-$BioSport$$s CFO to encourage K&R to accept the valuation, your finding that the valuation materially overstates the value of those assets, and your intention to have the audit report take exception to the valuation.