Case 2-8
Juggyfroot

This case shows the auditors resisting pressure from the client to change to a non justified accounting treatment.
The stakeholders of this case are the bank, the shareholders, creditors, suppliers, employees, and officers of the firm. The stakeholders expect non-misleading financial statements. Deziloo has an obligation to perform the audit with integrity, objectivity, and due professional care. From a rights perspective, it is not right to mislead the investors by making it look as though the company is doing better than it really is. Any attempt to intentionally misstate the financial statements violates the categorical imperative. From a justice perspective, stakeholder interests are not fairly represented because the perceived interests of the management are given priority over the interest of all other stakeholders. From a utilitarian perspective, Rule-utilitarianism requires that the correct rule should be followed. Act-utilitarianism requires that the act that creates the greatest good for the greatest number of stakeholders should be selected. None of the stakeholders benefit from an action that misstates net income. From a virtue perspective, honesty requires that the statements should be truthful and recognize revenue using generally accepted accounting principles. Objectivity requires that the company should approach its decision about the proper asset classification with fair-mindedness and without partially to one set of stakeholders. Trustworthiness means that the accountants should not violate the investors’ faith that the statements are accurate and reliable. Integrity requires that Rikey should have the moral courage (which he did) to withstand Baitz’s pressure, and not to subordinate judgment.

Under the AICPA Code, the ethical issues are summarized in the principles of the Code, Articles I (Responsibilities), II (The