Linus Peabody is a junior auditor with the accounting firm Dig and Deep, LLP. He recently discovered through a casual conversation with Betty Boone, another audit junior with Dig and Deep, that one of the firm’s clients has recently received complaints that its heart monitoring equipment was malfunctioning. The client, Cardio Monitoring Systems Inc. (CMSI), called a meeting of the lawyers, auditors, and top management to discuss what to do about the complaints from health care facilities that had significantly increased in 2020 compared to other years. Doctors at these facilities claim the systems shut off for brief periods and, in one case, the hospital was unable to save a patient who went into cardiac arrest. Linus wondered what he should do about the fact that Bass Lake Medical Centre (BLMC), his current audit client, planned to buy 20 units of CMSI heart-monitoring equipment for its new medical facility in the outskirts of Bass Lake, Ontario. Twenty units represent a material amount for both BLMC and CMSI.

REQUIRED
a. Linus has not told anyone on the Bass Lake audit team about the situation at CMSI. What fundamental ethical principles are relevant to his situation? What are his obligations under the Rules of Professional Conduct?
b. Use the ethical decision-making framework to analyze what Linus should do.
c. Assume the managing partner of the Dig and Deep firm is made aware of the problem of Bass Lake and CSMI. What is the ethical dilemma that the managing partner faces?
d. What actions do you suggest the managing partner take and why?