Brian Marlow recently was hired to prepare Louise Michener Consulting’s year-end financial statements. Brian just earned his CPA certificate, and Louise Michener was one of his first clients. Louise employs a bookkeeper, Martha Halling, who does the daily journal entries and prepares a year-to-date trial balance at the end of each month.

Martha gives the December 31 trial balance to a CPA to make the adjustments and generate the financial statements. As Brian was looking through Louise Michener’s books, he noticed two things. First, in each of the last three years, a different CPA had prepared the financial statements. Second, the amount shown on the December 31 trial balance for miscellaneous expense was quite high this year compared to prior years.

Brian called Martha to find out if she knew why miscellaneous expense had such a high balance. Martha’s response was “I just do what Louise tells me to do. If she wants to charge personal expenses to the company, it’s none of my business.”

1. What should Brian do?

2. How might Brian’s decision affect Martha? Has Martha done anything unethical?

3. Write a short letter from Brian to Louise explaining why personal items should not be charged to a business.

4. In small groups, discuss the ethical responsibilities of an accountant relating to a client’s books.