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Ethics 7401 Paper

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Submitted By pleasant
Words 1402
Pages 6
Zac Johnson
ACCT 7401
Individual Assignment 1
3/25/2015
Sarah Jones Case

Frame the ethical issue
The ethical issue in this case deals with Sarah Jones independence of conducting the audit of FNB because her parents are dependent on the dividends from their significant investment in the bank.
Gather all the facts
Sarah Jones serves as an auditor in charge at a reputable accounting firm Trout & Cod CPA firm. She supports her family financially while her husband is a stay-at-home dad taking care of their two kids. During the audit of First National Bank (FNB), Sarah discovered that several significant commercial loans had deteriorated since the previous audit. Sarah believes that the reserves are not adequate because of the deteriorating loans and because of this she estimates the stock price could drop from $45 a share to below $18 with dividends being discontinued. Her situation becomes an ethical issue when she finds out that her parents invested nearly 25% of their retirement funds in FNB’s common stock. Her parent’s investment does not conflict with the CPA firm’s conflict of interest policy because her parents are not dependent on Sarah.
Identify the stakeholders and obligations
Trout & Cod CPA firm: Sarah’s obligations to the firm is to maintain the high standards and strong reputation that the firm has built.
First National Bank: Sarah’s obligations to the FNB is to ensure that she provides professional services to the best of her ability.
Shareholders of FNB: Sarah’s obligations to the shareholders of FNB is to maintain objectivity and integrity throughout the audit. The investors rely on the financial information that she audits.
Customers of FNB: Sarah’s obligations to the customers of FNB is to maintain objectivity and integrity throughout the audit.
Sarah Jones and her family: Sarah also has obligations to herself and family.

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