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Case study 1: You are the finance director of a district council. The chairman of the finance committee approaches you asking to see all the information the housing benefits section holds about the financial and personal affairs of a councilor. The chairman of the finance committee insists on seeing this information (saying that he will not disclose how he acquired it), even though he cannot identify any legitimate reason. The chairman is not willing to contact the councilor about this. Confidentiality: Are there proper grounds for disclosing the information? Professional behavior: What should you do to safeguard your reputation? Case study 2 You are the external auditor of a hospital trust. The trust is hoping, and expecting to receive enhanced status in the near future, which will afford it more autonomy and provide opportunities to pursue a number of exciting projects. As the trust passed its financial year end, some unforeseen liabilities came to light. The trust's director of finance and chief executive had reported to the board of trustees and the regulator that the trust would break even for the year. The director of finance then made a number of accounting adjustments in order to ensure that the trust would meet its financial responsibilities, including the requirement to break even each and every year. The adjustments required changing the accounting policy in respect of stock, which had previously been valued on a 'first in, first out" basis as specified by International Financial Reporting Standards. In addition, certain salaries have been capitalised, and the trust has failed to account for its share of liabilities under a partnership agreement with a local authority, which has yet to prepare the memorandum account. 18 -Case study 2 The adjustments come to your attention during your audit process, and you do not accept that they are correct. As they are material, if the trust does not amend its accounts, you will have to qualify your audit opinion on the year end accounts. When you discuss the issues with the director of finance, he is emphatic that his view represents a legitimate interpretation of accounting policy. He indicates that if you do not accept it, he will ensure that the trust appoints different auditors next year. He also threatens to tell the local newspaper that your firm is determined to make the trust's financial position look worse than it is. Integrity: Would you be acting with integrity if you were influenced by the finance director's threats, and accept his year end adjustments? 19 Case study 2 Objectivity: How can you maintain your professional objectivity in the face of the threats made by the finance director? If your firm's local reputation and continued engagement by the trust affect your own position, how can you avoid self-interest influencing your ethical judgement? Professional behavior: You are required to perform your work in accordance with applicable law and regulations, including relevant auditing standards. How should you act so as not to discredit yourself, your firm or your profession