Reference no: EM132642161
Case Study
Mike Howard and Nick Iles were ACCAs who were contracted by a Perth based second tier accounting practice, Bright, Candle and Light Partnership to supply a range of accounting, auditing and consultancy services to farmers and businesses in the Great Southern Region of Western Australia. This was the partnership's first attempt to enter the market in this region.
The partnership supplied office space in Albany and funded all necessary infrastructure and administrative expenses, which included the employment of a full time receptionist and office assistant. In return, Mike and Nick were required to contribute 60% of their gross earnings to the practice for all contract work.
Nick had been in the contract business for some years, but only recently moved down to Albany to work. He was single and had a half interest in a Mount Barker winery which absorbed much of his spare time and personal cash surplus. He prefers to operate alone and rarely provided support for Mike, whose experience in accounting was relatively limited. Mike, who was born in Albany, was married with two small children. He had recently built a home in the town and as the sole provider, was burdened with a significant mortgage.
Mike was conscientious and eager to establish a good client base. He willingly supported Nick with his client operations when the latter was unavailable and had not pressed Nick for any compensation for work undertaken on his behalf. At the same time, Mike's personality and genuine interest in the local business community was attracting some goodwill. Mike was fair and open with his clients, clearly explaining the fees and charges associated with the services he provided and regularly negotiated terms and conditions that best suited the client's budget. He attempted to accommodate their needs by organizing service contracts ensuring a good quality job was provided at a reasonable cost. He also provided pro bono services to local non-profit organizations.
When assisting Nick, Mike found that his colleague regularly over charged for services and was extravagant when determining time allocations for jobs. Nick also appeared to provide costly ancillary services that Mike believed were unnecessary. Mike tried to raise the issue with Nick, but the latter claimed that, as an experienced professional, he was well aware of what was best for his clients and that he had received no complaints.
Mike eventually discussed the issue personally with the senior partner Abel Bright who was responsible for the Albany operations. Abel appeared somewhat sympathetic, but countered that Nick was generating a lot of business and while he had not received any major complaints from his clients he was reticent to any problems at this time. He reassured Mike that he would nevertheless keep the matter under review.
The months went by and both accountants were subjected to a periodic appraisal by senior partners. Mike was counselled about the relatively high level of accounts receivable he was generating and was encouraged to concentrate more attention on gaining business from cashed up local businesses. Nick Iles continued with his policy of overcharging clients and keeping them ignorant of his service and pricing strategies.
Mike was becoming quite distressed. Nick's activities meant that he has generating up to forty percent more revenue each month than Mike. Mike made a final plea to Abel Bright about his colleague's apparent unethical practices and threatened to cease employment with the company unless something was done. Abel Bright made no response to the threat and offered no immediate solution to the problem.
Required
1. a) Briefly describe the Utilitarian approach to ethical reasoning and illustrate using information from the case study.
2. b) Select Abel Bright as the principal stakeholder and refer to at least another four (4) stakeholders affected by the dilemma. Why do you select each of them?
3. c) In normative terms, clearly define the main ethical dilemma facing Abel Bright when Mike Howard rang threatening his resignation over his colleague's unprofessional activities.
4. d) Identify at least three (3) alternative courses of action that Abel Bright could consider taking after speaking with Mike.
Note: Book : Psaros, J., Australian Corporate Governance: A review and analysis of key issues, 2009 or onwards. Pearson Education Australia.
(ISBN/ISSN: 9781442500259)
Subject: ACCT5029 CPA Ethics and Governance