TUGAS ETIKA BISNIS BY Teddy Dunggio LOVE AND A QUESTION: WHAT SHOULD THE CPA DO? 1. Q: What should Todd do? A: Todd must persuade his wife (Carried) to think it over by telling or reporting the cash sales of that day to the accountant (Harold Heywood), because there would be a great deal of risks if she didn’t report that. Besides, Todd already told her the rules of tax sales/income tax, and even though Carrie was being asked (by Mrs. Cook) wasn’t a good practice, it’s kind of fraud (hiding sales fraud, by not reporting the cash sales, it would reduce income, then the tax of that income would be lower than it was supposed to be). Q: What is Todd’s responsibility to the profession? A: Todd had the obligation as an up-coming CPA to tell the truth and applied what he already learnt in the accounting school (because he already knew the rules of good practice of accounting, it was proven by being already passed the examination of becoming CPA. Even though he must wait until he got enough experiences to earn his CPA). Especially what he already learnt in accounting school are ethic codes of being CPA, some of them are Integrity and objectivity/ conflict of interests (not having certain interest because of special relationship with that PIC). Q: What is Todd’s responsibility to Carrie? A: As a husband, Todd must love and protect Carrie (as the wife) from any harm and also support her career. But in this case, in term of protecting Carrie from any harm, then Todd must warn Carrie about hiding some sales and hiding tax income could be considered as the attempt of breaking the law, there will be a greater risk i.e: going to jail (even though Carrie is just a staff, she could be considered as the accomplice of Mrs. Cook in income tax fraud/sales fraud) 2. Q: Does it make any difference if Todd is not yet a CPA? A: It doesn’t make any difference if Todd isn’t a CPA yet. The reason he isn’t a CPA yet is that he must wait until he gets enough experience to earn his CPA. He already passed the CPA exam and he already went to the accounting school. It means that he already knows the rules and he knows what are the good practices in accounting. He must have learned the principles and ethic codes of becoming a CPA, then he must apply what he learns when he faces issues with accounting problem. 3. Q: Is Todd obligated to take action based on a formal code of professional ethics? A: Yes, Todd is obligated to take action regarding to a formal code of professional ethics. Applying what he learns in his school and what he knows are the best practice and test for him to uphold the rules or professional ethics. CPA is just a title or a piece of certificate but what counts more in becoming a CPA is how an accountant can carry and do as his/her responsibilities as a CPA. But what he could do only to give advice, because he didn’t have the authority as the auditor (legally) of that case. 4. Q: Should Todd ask advice of a principal in his firm? A: If he couldn’t persuade his wife to tell the truth and not to get involved in income tax/sales fraud, yes, Todd could ask some advice from a principal in his firm. Maybe that principal had a better solution. 5. Q: What rules of confidentiality are involved? A: In this case rules of confidentiality is involved, In IFAC Code of ethics : section 140:7, “the following are circumstances where professional accountants are or may be required to disclose confidential information or when such disclosure may be appropriate: a. Disclosure is permitted by law and it’s authorized by the client or the employer”. Because in this issue he wasn’t the one who directly got involved in the situation or he legally appointed to become the auditor or the accountant of that case and also he didn’t have the authorization from Mrs. Cook, so he couldn’t disclose the issue to anybody. 6. Q: Should Todd, as a professional courtesy, discuss the matter with Harold Heywood? A: Yes, he could discuss the matter with Harold Heywood (the accountant), but Todd mustn’t tell the subject of that matter (which was Mrs. Cook). He must pretend that the matter came from another shop (must keep some information just to himself) Q: What if he knows Heywood is a close friend of Mr. Cook? A: Even though he knows that Heywood is a close friend of Mr. Cook, he still can discuss the matter, but as long as he keeps certain kind of the information to himself (such as: the subject : Mrs. Cook, the shop name, and the informant), just pretend that the matter comes from other shop and from other person. 7. Q: In considering broader ethical issues, who is harmed by Mrs. Cook’s current practice, if it is being used to avoid the recognition of income? A: The one who is being harmed is Carrie, because if Carrie helps that kind of practice, she can be considered as the accomplice of Mrs. Cook. Mr. Heywood can be harmed too, because what he calculates as an accountant so far is wrong. He will have bad image either because of this. 8. Q: What are the personal and professional benefits or the consequences if Todd takes action on his knowledge? A: If Todd takes action on his knowledge then Carrie will get out of the hook as becoming the accomplice of Mrs. Cook, because he can testify that Carrie didn’t know what she did was wrong, so Todd has the obligation to tell the truth and rules to Carrie and ask his wife not to break the law. The consequences are: a). Carrie (his wife) will get upset because her dream to buy into the business (as partner) will disappear, b). Carrie will lose her job, so Todd’s household will only has one source of income which is from Todd only. Q: What if he takes no action? Think of this in terms of Todd, of Carrie, of Todd’s Firm, of Heywood, of the general public. A: If Todd doesn’t take any action, In term of Todd: it means Todd isn’t the real CPA, because he doesn’t apply what he already learns from his school besides he doesn’t uphold ethic codes as the CPA. In term of Carrie: Carrie will be glad and happy because she intends to buy into the business to become the partner of Mrs. Cook In term of Todd’s firm: it means that Todd’s firm has hired a wrong person to become an accounting staff, because Todd can’t uphold ethic codes as the CPA. In term of Heywood: Heywood doesn’t know what the real sales and tax income must be reported. It means that Heywood doesn’t do his job well. It can give him bad name. In term of general public: If General public doesn’t know about what is the real situation, then maybe some of the public wants to invest in that shop or also wants to become a partner, he/she will be trapped in this fraud, and she/he won’t get her/his real dividend because of this fraud. 9. Q: What should Todd do about his information if the CPA firm for which he works is hired to do Mrs. Cook tax work? A: Todd must make the tax calculation based on the real income and sales. 10. Q: What should Todd do about his information if the CPA firm for which he works is hired to audit Mrs. Cook? A: Todd must report his findings to the firm and also to Mrs. Cook, and make recommendation what is the best practice and make the tax calculation based on the real income. Also show what kind of rules that Mrs. Cook already breaks if she keeps doing what she does and also tells her the consequences either.
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