Answered step by step
Verified Expert Solution
Question
...
1 Approved Answer
In 2 0 0 0 , Arnold Owusu was a bright, upcoming audit manager in the Accra office of one of the big four accounting
In Arnold Owusu was a bright, upcoming audit manager in the Accra office of one of the big four accounting firm. He was an excellent technician and a good people person. Arnold also was able to bring a new business into the firm as the result of his contacts in the rapidly growing Ghanaian business community. Arnold was assigned a new client in XYZ securities Inc., a privately held brokerdealer in the secondary market for Ghana government securities Neither Arnold nor anyone else in the Accra office had brokerdealer audit experience. However, the ICAG and Arnolds firm had audit aids for the industry which Arnold used to get started. Arnold was promoted to partner in Although this was a great step forward for him he was a new staff assistant in Arnold was also under a great deal of pressure. Upon making partner, he was required to contribute capital to the firm. He also thought he must maintain a special image with his firm, with his clients, and within the Ghanaian community. To accomplish this, Arnold maintained an impressive wardrobe, bought a BMW and a small speedboat, and traded up to a nicer house. He also entertained freely. Arnold financed much of this higher living with credit cards. He had six Visa and banking cards and ran up a balance of about GHC After the audit was completed and before the audit was to begin, Arnold contacted Jack Allotey, the CFO of XYZ Securities, with a question. Arnold had noticed an anomaly in the financial statements that he couldn't understand and asked Jack for an explanation. Jacks reply was as follows: Arnold, the financial statements were materially misstated and you guys just blew it I thought you might realize this and call me so here's my advice to you. Keep your mouth shut. Well make up the loss we covered up last year, this year, and nobody will ever know the difference. If you blow the whistle on us your firm will know you screwed up and your career as the star in the office will be down the tubes. Arnold said he'd think about this and get back to Jack the next day. When Arnold called Jack, he had decided to go along with him. After all, it would only be a shift of a loss between two adjacent years. XYZ is a private company, and no one would be hurt or know the difference. In reality, only he was the person exposed to any harm in this situation, and he had to protect himself, didn't he When Arnold went to XYZ to plan for the audit, he asked Jack how things were going, and Jack assured him they were fine. He then said to Jack, Jack, you guys are in the money business, maybe you can give me some advice. I've run up some debts and I need to refinance them. How should I go about it After some discussions, Jack volunteered a plan Jack would give Arnold a check for GHC XYZ would request its bank to put GHC in an account in Arnold's name and guarantee the loan security on it Arnold would pay back the GHC and have GHC of refinancing. Arnold thought the plan was great and obtained Jacls check for GHC During through three things happened. First, Arnold incurred more debts and went back to the well at XYZ By the end of he had "borrowed" a total of GHC Second, the company continued to lose money in various offthebooks investment schemes. These losses were covered up by falsifying the results of normal operations. Third, the audit team, under Arnold's leadership, failed to find the fraud and issued unqualified opinions. In Jack had a tax audit of his personal return. He asked Arnold's firm to handle it and the job was assigned to Bob Smith, a tax manager. In reviewing Jacks records, Smith found a GHC check payable from Jack to Arnold. Smith asked to see Arnold and inquired about the check. Arnold somewhat broke down and confided in Smith about his problems. Smith responded by saying, Don't worry Arnold, I understand. And believe me Ill never tell a soul. In XYZs continuing losses caused it to be unable to deliver nonexistent securities when requested by a customer. This led to an investigation and bankruptcy by XYZ Losses totalled in the millions. Arnolds firm was held liable, and Arnold was found guilty of conspiracy to defraud. He is still in prison today. Required a Try to put yourself in Arnold's shoes. What would you have done be honest with yourself now when told of the material misstatement in mid b What do you think of Bob Smith's actions to help Arnold? c where does one draw the line between ethnical and unethical behaviour?
In Arnold Owusu was a bright, upcoming audit manager in the Accra office of one of the big four accounting firm. He was an excellent technician and a good people person. Arnold also was able to bring a new business into the firm as the result of his contacts in the rapidly growing Ghanaian business community.
Arnold was assigned a new client in XYZ securities Inc., a privately held brokerdealer in the secondary market for Ghana government securities Neither Arnold nor anyone else in the Accra office had brokerdealer audit experience. However, the ICAG and Arnolds firm had audit aids for the industry which Arnold used to get started.
Arnold was promoted to partner in Although this was a great step forward for him he was a new staff assistant in Arnold was also under a great deal of pressure. Upon making partner, he was required to contribute capital to the firm. He also thought he must maintain a special image with his firm, with his clients, and within the Ghanaian community. To accomplish this, Arnold maintained an impressive wardrobe, bought a BMW and a small speedboat, and traded up to a nicer house. He also entertained freely. Arnold financed much of this higher living with credit cards. He had six Visa and banking cards and ran up a balance of about GHC
After the audit was completed and before the audit was to begin, Arnold contacted Jack Allotey, the CFO of XYZ Securities, with a question. Arnold had noticed an anomaly in the financial statements that he couldn't understand and asked Jack for an explanation. Jacks reply was as follows:
Arnold, the financial statements were materially misstated and you guys just blew it I thought you might realize this and call me so here's my advice to you. Keep your mouth shut. Well make up the loss we covered up last year, this year, and nobody will ever know the difference. If you blow the whistle on us your firm will know you screwed up and your career as the star in the office will be down the tubes.
Arnold said he'd think about this and get back to Jack the next day. When Arnold called Jack, he had decided to go along with him. After all, it would only be a shift of a loss between two adjacent years. XYZ is a private company, and no one would be hurt or know the difference. In reality, only he was the person exposed to any harm in this situation, and he had to protect himself, didn't he
When Arnold went to XYZ to plan for the audit, he asked Jack how things were going, and Jack assured him they were fine. He then said to Jack,
Jack, you guys are in the money business, maybe you can give me some advice. I've run up some debts and I need to refinance them. How should I go about it
After some discussions, Jack volunteered a plan Jack would give Arnold a check for GHC XYZ would request its bank to put GHC in an account in Arnold's name and guarantee the loan security on it Arnold would pay back the GHC and have GHC of refinancing. Arnold thought the plan was great and obtained Jacls check for GHC
During through three things happened. First, Arnold incurred more debts and went back to the well at XYZ By the end of he had "borrowed" a total of GHC Second, the company continued to lose money in various offthebooks investment schemes. These losses were covered up by falsifying the results of normal operations. Third, the audit team, under Arnold's leadership, failed to find the fraud and issued unqualified opinions.
In Jack had a tax audit of his personal return. He asked Arnold's firm to handle it and the job was assigned to Bob Smith, a tax manager. In reviewing Jacks records, Smith found a GHC check payable from Jack to Arnold. Smith asked to see Arnold and inquired about the check. Arnold somewhat broke down and confided in Smith about his problems. Smith responded by saying,
Don't worry Arnold, I understand. And believe me Ill never tell a soul.
In XYZs continuing losses caused it to be unable to deliver nonexistent securities when requested by a customer. This led to an investigation and bankruptcy by XYZ Losses totalled in the millions. Arnolds firm was held liable, and Arnold was found guilty of conspiracy to defraud. He is still in prison today.
Required
a Try to put yourself in Arnold's shoes. What would you have done be honest with yourself now when told of the material misstatement in mid
b What do you think of Bob Smith's actions to help Arnold?
c where does one draw the line between ethnical and unethical behaviour?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started