You graduated from college three years ago



ACCT 415 – Ethics Case #1

You graduated from college three years ago, and since graduation have been working for Ambrose and Ambrose, a national CPA firm. At a family picnic you are sitting at a picnic table with Greg, a 17-year-old first cousin.

You say, “I hear your dad is doing great at Matrix.” (His dad, your uncle Jack, is the CFO of Matrix Metals.)

“I guess so. At least that’s what dad says.”

You nod your head. “Heard that Matrix had record earnings for 2015.”

“I guess. Earnings the same as revenues?”

You explain the difference.

“Oh. Yeah, I guess 2015 was pretty good. Dad said he was moving some revenues from 2015 to 2016.”

“Pardon?”

“Huh? Well…when I was empting some trash cans, you know that dad got me a part-time job at Matrix, I heard dad and some others talking. About how 2016 might not be as good 2015. He told them what they had to do to move some revenues to 2016.”

“Greg, are you sure you heard correctly?”

“Yeah. He was really emphasizing his words. You know had dad is. Why?”

“Maybe you misunderstood him? Moving revenues to another year is fraud.”

“There is no misunderstanding dad. Wait…fraud? No..no. Not changing revenue. Just moving an amount to another year. Not changing it.”

You say nothing.

“I know what I heard. You telling me it’s not legal?”

“You probably just misunderstood.”

“No way. Sounds like something dad would do.” Greg picks at his fingernails. “But don’t say anything. Please!” When you say nothing, Greg adds. “You can’t. I’m pretty sure dad does not know I heard. But he’ll know. He always knows. You can’t. You just can’t.”

After the picnic you think about the conversation with Greg. He was right – it did sound like something Uncle Jack would do. But you wonder what you should do. Matrix is an audit client of Ambrose & Ambrose, but you are not on the engagement team, or have any involvement in the audit. Do you talk to your Uncle Jack first? But Greg and his dad have a rocky relationship, at best. Do you go directly to the engagement partner? Or talk to Uncle Jack first, then go to the engagement partner only if what Jack tells you still leaves you wondering? But can you trust what Uncle Jack says? What to do.

Required: Write a report addressing the parameters included in the 415 Ethics Rubrics, paying particular attention to the ethical implications of this situation. Come to a conclusion as to what you should do.