Executive Summary
This report was written to help guide the various organizations and their respective employees on best decision making by looking into the case from Alex Caldwell and Marshall Mining Equipment and Service Company. The report explains the theories of egoism, utilitarianism, and deontology, and investigates issues involving Fiona Willis, Caldwell, Burns, and Burns Public Accountants using those theories. This report gives a more detailed analysis of ethical decision-making models, AAA, a proper decision-making model, and APES 110.
Whistleblowing within a business may promote proper compliance with the law, deter companies and individuals from doing something wrong, and, most importantly, promote a necessary ethical culture in the industry by increasing the likelihood that individuals or companies do any sinful thing would be reported.
Introduction
This report deals with the Marshall accounts issue. It came to notice that Hugo Marshall, the founder of Marshall Mining Equipment and Service, wanted Fiona Willis to take some unethical actions while managing the accounts of his company. Fiona Willis is a chartered accountant and was assigned to work at Marshall’s employer company’s interpretations. Fiona is employed by Caldwell, Burns, and Burns Public Accountants, owned by Alex Caldwell. Since Caldwell had a mutual beneficiary relationship with Marshall, which was misused by Marshall for his benefits, this created conflict between the three parties. Now, Caldwell had to make an ethical decision concerning this matter.
Improving governance and business accountability should be the most strategic priority for any business in Australia or worldwide. Ethics must always play a central part in any business decision making, and the business decisions should also be supported by much broad ethical culture within the business itself.
The ethics in business can be shown through the following ways; a good understanding of the company’s new challenges, proper analysis of the ethical theories to solve the emerging problems, and my willingness to apply and review realistic solutions.
To guide ethical decision making, the report was structured into three
objectives as follows:
1) Part A – To provide a brief understanding of the moral philosophies and theories of ethics and analyze the Marshall accounts problem to identify possible moral perspectives related to the motivation and actions.
2) Part B – To provide a comprehensive analysis of AAA ethical decision-making models and advice on how it could be used in the Marshall case to make a well-defined proper decision.
3) Part C – To advise the member of CPA on the requirement on APES 110 and how it could help decision-making, particularly on threats and safeguards to professionals.
Part A: Applying theories of ethics
All of the ethical issues aims at one goal, but there are several basic ways to get to that point. Each approach is like a different tool, trying to give further understanding of ethics in businesses.
Three fundamental theories can be applied to solve the issue involving Fiona Willis, Alex Caldwell, and Hugo Marshall and ensure more ethical business decisions are made. Namely, the theory of egoism, deontology, and finally, the idea of utilitarianism.
- Analyze Fiona Willis’ action using the theory of egoism.
Egoism can be termed as personal or self-interest. It may merely mean “me myself and me.” The motivation and the goal of one’s actions were displayed in Fiona Willis’s actions in many ways. Ethical egoism theory is usually a theory which holds the promotion of a party’s good is by morality. It is mostly held that it is moral to promote a person’s benefit, and it is never seen to be ethical when not promoting it. However, it is always honest to enable an individual’s good.
Given that Fiona Willis might have had some potential conflict of interest through her husband clearly shows some egoism culture. After Fiona had agreed to take the troubling accounts to The Caldwell, Burns, and Burns Public Accountants, she found out that Marshall was acquiring many local businesses. One of the firms was The Metal Fabrication Company, which her husband worked for. So, Fiona possibly had a conflict of interest. Dishearteningly, Fiona only had thought that in case she reported the matter to Alex Caldwell, she may perhaps be removed from the accounts, but the accounts were Fiona’s big break. So Fiona ended up keeping quiet on the issue to benefit her self. Besides, Fiona thought for herself that she kept her maiden name instead of taking her husband’s name.
Regarding this theory, Alex Caldwell must handle this problem by ensuring there is no minimum selfishness.
2)Analyze Fiona Willis’ action using the theory of deontology.
The Deontology states that actions are good or bad, according to a particular set of rules clearly said. Deontology comes from the Greek word deon, which means duty.
From an ethical view, deontology brings about some rights and obligations to a person since one has inherent dignity, which helps prevent the person from taking some actions that might be wrong and, consequently, behave ethically. So deontology may also be termed as a rule-based ethic. This theory can be noticed in Fiona’s actions in some instances.
First of all, Fiona had to take over the duty to handle the Marshall Mining Equipment and Service Company even though Hugo Marshall was well known for his abrupt, rude, and even bullying personality. She had an obligation of complying with the laws. Also, Fiona had to abide by the determined Australian Tax Office (ATO) rules and account for the tax as required by the law. On the other hand, according to Marshall, Fiona’s “overly conservative” approach was not suited for his entrepreneurial company. But, she told Fiona on a phone call that her flawed tax (mainly for fringe benefits tax) had resulted in an onerous tax liability imposed by the Australian Tax Office.
Marshall wanted Fiona to work according to his way, or she might risk being replaced.
Alex Caldwell may use this approach in solving the Marshall problem by taking all the necessary actions as stated by the law in concern of this matter
3)Analyze Alex Caldwell’s activities using the theory of utilitarianism.
Utilitarianism is a theory of ethical decision making in business that advocates for actions that foster happiness or pleasure and opposes efforts that are likely to cause unhappiness or harm. The maxim of utilitarianism is “ The greatest good for the greatest number.”
Alex Caldwell’s actions displayed some culture of utilitarianism in various instances. The instances include when he placed a lot of effort into nurturing the relationship with Hugo Marshall. His “charm offensive “ efforts were meant to make Hugo Marshall always to feel comfortable working with Caldwell’s accountants.
Through this theory’s knowledge, Caldwell can handle the Marshall problem by taking an approach that will make many people feel comfortable, and that is by ensuring the employees feel happy but not only Marshall.
Part B: Using an ethical decision-making model.
An ethical decision is the decision that priorities trust, and therefore shows duty, fairness, and caring to any company or an individual. The American Accounting Association (AAA)model is a useful framework that one can use to make an ethical decision.
The model entails seven step by step questions as follows;
1)establishing the facts of the case.
This will ensure that there is no ambiguity during the decision making process. In this case, the facts are as follows; Fiona Willis has been credited as a chartered accountant at Caldwell, Burns, and Burns public Accountants owned by Alex Caldwell. Hugo Marshall wants to assert some pressure to Fiona Willis, the currently assigned account to his company, so that she may go against the law requirements on accounting for the tax liability. The tax imposer is the Australian Tax Office. Hugo Marshall has acquired many local businesses and seems to be working on the acquisition of some more. Given that one of the companies acquired is The Metal Fabrication Company, where Fiona’s husband worked for, Fiona has a potential conflict of interest.
2) What are the ethical issues in the case?
The ethical issue which is faced by Caldwell is whether to comply with the unlawful ways of accounting for the tax as required by Marshall or follow the legal law and avoid fraud. At the same time, he wants a mutually beneficial relationship between him and Hugo Marshall to remain healthy.
Also, Fiona might be having a conflict of interest since her husband worked in a company acquired by Hugo Marshall. Caldwell has been acting against the law by providing accountants who are compliant to Hugo Marshall and Would deliver results that were more beneficial to Marshall. They would get inflated invoices in return, which were paid promptly.
3) What are the norms, principles, and values related to the case?
This involves putting the decision in its social, ethical, and, in some cases, professional behavior context. As per this case, Marshall Mining Equipment ad Service Company needs to comply with the law and compete fairly with the other local companies. In this case study, Caldwell should have an ethics program to guide. The accountants. This is because professionals are usually bound to the code of ethics of the professional association in which they belong. In this step of the American Accounting Association (AAA) ethical decision-making model, Caldwell must consider the norms, principles, and values associated with the moral issue and explain the effects involved in this action to the individuals, company, society, and profession. According to Marry Guy (1990 cited in Dellaportas et al., 2005), when evaluating an ethical issue, the decision-maker required to consider ten core values; caring, honesty, accountability, promise-keeping, pursuit of excellence, loyalty, fairness, integrity, respect for others and responsible citizenship. On the other hand, Fiona has to handle the tax liability accounts as per the requirements by the Australian Tax Office (ATO).
4) What are the alternative causes of actions?
Fiona is an employed accountant who is chartered in Caldwell, Burns, and Burns Public Accountants. She works for Marshall Mining Equipment and Service Company, which is owned by Hugo Marshall. But Alex Caldwell is the employer of Fiona and had assigned her to work for Marshall accounts; it is, therefore, difficult for Caldwell to make
a fair decision to satisfy all the parties. Hence, the following alternative actions are available to him;
- Replace Fiona with a more compliant accountant
- Try explaining to Marshall that this will lead to a fraud
- Do not comply with Marshall’s requirements
- Seek advice from accounting professional association
- Consider obtaining legal advice
- End his unhealthy relationship with Marshall
5) What is the best course of action that is consistent with the
norms, principles, and values identified in step 3?
According to the above analysis, the norms, principles, and values of this case impact different parties differently. Due to various circumstances and relationships, the principles and values. Nevertheless, some values are ethical, and some are non-ethical. Non-ethical costs are mostly concern with personal dealings such as social relationships, financial security, and job security (Walker,1993). The table below represents the above alternative cause of actions and impact on the values and principles.
Table 1: Alternative cause of actions impact on values and principles
| Alternative actions | Impact |
| Replace Fiona with a more compliant accountant. | All of the above alternatives will help in making an ethical decision. This is because they both adhere to professional standards and principles. |
| Try to explain to Marshall that the action would lead to fraud. | |
| Do not comply with Marshall’s requirements. | |
| Seek advice from accounting professional association | |
| Consider obtaining legal advice. | |
| End the unhealthy relationship between
him and Marshall |
|
relationship between
6) What are the consequences of each possible course of action?
In this step, Caldwell as the decision-maker is required to weigh all the alternative cause of actions based on whether it the consequences effect on values and principles and how it affects others parties, including Fiona and Marshall.
Table 2: Alternative cause of actions and consequences
| Alternative action | Consequences |
| Replace Fiona with a more compliant accountant | This will create a conflicting situation between Caldwell and Fiona.
This will lead to fraud. This will lead to continued pressure from Marshall to Caldwell. |
| Try to explain to Marshall that the actions would lead to fraud. | This would lead to avoided fraud.
This will also lead to a more healthy relationship. This will make Fiona secure her job. |
| Do not comply with Marshall’s requirements. | This will result in a conflict between Marshall and Caldwell.
Fiona might also lose her job or be replaced. This can end the destructive relationship between Marshall and Caldwell. |
| Seek advice from accounting Professional association | This may result in complying with the rules
It Will make both parties to create a more informed decision |
| Consider obtaining legal advice | Conflict may arise between Marshall and Caldwell’s accountants
The lawful way will be followed |
| End his unhealthy relationship to Marshall | Fiona may end up losing her job
Caldwell’s company income will decrease The accountants will work from a less pressured environment and comply with the law. |
7) What is the decision?
In this final step of the AAA ethical decision-making model, Dellaportas et al. (2005) has demonstrated that the decision-making party must balance the consequences for each cause of action and select the most appropriate alternative. After analyzing the above steps 5 & 6, Caldwell will explore a wide range of activities and related consequences on this situation. Therefore, Caldwell could adopt the following plan instead of selecting only one alternative cause of action to resolve the problem. First, Caldwell can try to explain to Marshall about the future consequences of this action.
- Second, he can seek advice from the professional accounting association, and if this fails
- Finally, if he is unable to resolve the issue, according to the above
analysis, ending the unhealthy relationship with Marshall might sound a better justification.
Part C: Using APES 110
Alex Caldwell is a chartered accountant, and so are the accountants in the form. Therefore the APES 110 applies to all of them. There are some APES 110 provisions which are relevant in this case. The APES 110 is the Code of Ethics for Professional Accountants issued by APESB (CPA,2104). And the members in Australia need to comply with the code when providing Professional Service in an honorary capacity (APESB,2010). Primarily the code categorized into three parts, Part A applies to all members, Part B applies to members in the public practice, and Part C applies to members in the business (CPA,2104). APES 110 gives a brief explanation of “the fundamentals of professional ethics for members,” a possible threat to fundamental principles and application of safeguards to reduce the risks (APESB,2010). Since Caldwell is the founder of Caldwell, Burns, and Burns Public Accountants, he holds the duty to give guidance to the employees to follow the fundamental values of professional ethics to resolve an ethical problem.
1) Fundamental Values of Professional Ethics
The accounts measure and report the financial information with assurance and accuracy to the public to make decisions based on the accountants’ information. Therefore, the accountants need to prepare the financial statements and resolve conflict
situations by fundamental values of professional ethics shown in table3 below;
| Integrity | Straightforward and honest thinking on professional and business relationships. |
| Objectivity | Not allow: emotions, bias, conflict of interest, undue influence of others to guide the business & professional judgments |
| Professional competence & due care | Maintain proficient knowledge and skills up to date
Act diligently according to the technical and professional standards. |
| Confidentiality | Respect the confidentiality of the information acquired through
business and professional relationship by not disclosing to third parties |
| Professional behavior | To comply with the laws and regulations to avoid discredit situation for the profession. |
In this scenario, various accountants have come across unethical situations at Marshall Mining Equipment and Service company, which needed critical decision making on their career and company. However, if Caldwell has placed the above fundamental values within the organization, they will possibly reduce the window for creating a conflicting situation. This has occurred due to a failure to uphold the most important and fundamental principle, integrity. According to Dellaportas et al. (2005.p.105), “trust creates confidence and helps to build a relationship of reliance between business and stakeholders.” Hence it is an essential element to build the culture of trust and to other fundamental principles. For instance, if Caldwell and Marshall had practiced actual values, particularly integrity and objectivity, they might not be thinking of pressure to make an unethical decision based on their influence and the accountants. As a CPA Australia member, Caldwell is bound to comply with the constitutions, By-laws, and APES 110 code of ethics for professional accountants. The behavior is required to be maintained by agreeing to the above laws and code of ethics.
2) Threats to the fundamental principles
The management and authorities are unable to control the entire society to act ethically.
These threats may create as a result of a broad range of relationships and circumstances. Sometimes it can result in more than one hazard and effect on more than one principle (APESB,2010). These threats include the following:
- Self-interest threat- consider own self-interest rather than the public interest.
- Self-review threat – a person, cannot objectively review and evaluate his or her
work.
- Advocacy threat- member will become a salesperson for the client.
- Familiarity threat- long-term close relationship leads to more concern
on the client’s interest than the public interest.
- Intimidation threat- member will feel induced or pressured to act other than the public interest.
Source: (CPA,2014)
According to the above data, Caldwell has faced familiarity and intimidation threats in the Marshall issue due to his loyal relationship with Hugo Marshall.
3) The Safeguards
APES 110, paragraph 100.9, provides an accountant to eliminate or reduce threats identified in the above section. Mainly safeguards categories into two broad areas:
- Safeguards by profession, legislation or regulation
- Safeguards in the work environment
However, in this case, Caldwell’s id was to reduce or eliminate familiarity and intimidation threat by implementing safeguards in work the work environment.
The safeguards expounded in APES 110 will guide the professionals in
the organizations. Although, it will not cover all the precautions to threats faced by the
professionals. So, if it is not possible to reduce the risk to an acceptable level
, the employees can consider obtaining legal advice or resignation.
Conclusion
The main objective of this report is to guide the accounting professionals to resolve a potentially unethical situation with the support of evaluating philosophies/theories in ethics, the AAA ethical decision-making model, and APES 110. Therefore, the report started building the foundation from briefly assessing the ideas of ethics and explaining the Marshall accounts case. And it is notable that two branches of Teleological philosophy: act utilitarianism and enlightened egoism theories, justify the action. Also, the report has given a brief overview of APES 110 and the application of APES 110 to the Marshall problem. APES 110 provides vital guidance, particularly to the accountants in Australia. It highlights the threats to the fundamental principles and possible safeguards that could follow in those situations. It’s will only provide a professional judgment to the accountants and does cover the threats that may affect several principles.
References