The Case of the Friendly Audit - Page 6 of 44 Step 2: Being Intelligent Part 2Determine the Stakeholders We now know that the issue is to figure out how you might fairly establish the financial condition of G-BioSport. You may think that only a few people are involved. However, if you think a bit, you'll realize that other people are involved in this situation as well. Every ethical dilemma involves more than just you and one other person. In ethical decision making, we call people who may be affected by your decision stakeholders. As you are being intelligent, you'll consider the people involved in the dilemma and determine who'll be affected by your decision. Expanding your circle of concern and consideration allows you to make your decision intelligently, as you'll have a greater understanding of the potential consequences. Stakeholders can be divided into primary and secondary groups. Primary stakeholders are those who: are directly involved in this situation, are directly affected by the decision, or have interests that should be protected. Secondary stakeholders are those who: are so far removed from the situation that you don't have to worry about them, have delegated responsibility to others, or are interested observers but don't have any real involvement in the situation. Below is a list of people who might qualify as primary stakeholders. Only six of them are primary stakeholders. Four of them are secondary stakeholders. Check the six people or groups of people you think are primary stakeholders. Who are the primary stakeholders in this problem? You, Audit Partner You are responsible for the overall quality and accuracy of the audit. Jim Fry, K&R's new managing partner He assigned you to the G-BioSport audit and is responsible for all of K&Rs operations. Other clients of K&R They want their shareholders and regulators to know that their financial condition is precisely as stated in your certified auditors reports. Field auditors assigned to the G-BioSport audit Their work will contribute to the final audit report, and their reputation as a group will be affected by the quality of the audit. Employees of G-BioSport A decision on the valuation issue will affect the reported financial condition of the company. Mark Heier, G-BioSport CFO He is responsible for promoting the propriety of the mark-to-market valuation and has directly solicited support for it from you, the K&R audit partner in charge of the audit. Shareholders of G-BioSport Their short- and long-term financial interests can be affected by the way the audit report treats the mark-to-market valuation. Shareholders of K&R The value of their investment in K&R is directly linked to the companys reputation as an unbiased provider of auditing services. Public Company Accounting Oversight Board (PCAOB) They oversee the auditors of public companies, setting standards for auditing, quality control, and ethics related to preparing audits. They can also levy fines for individuals and auditing firms. Board of Directors of G-BioSport They oversee the management of G-BioSport and are accountable to the companys shareholders.