there are 2 questions just need the answers minimum of 2 paragraphs
\"We have had Paige & Gentry as our auditors for many years, haven't we, Jane? They have been here since I became president two years ago.\" \"Yes, Bob, I have been the Chief Financial Officer for seven years, and they were here before I came. Why do you ask?\" \"Well, they were really tough on us during the recent discussions when we were finalizing our year-end audited statementsnot at all like I was used to at my last company. When we asked for a little latitude, our auditors were usually pretty obliging. Frankly, I'm a little worried.\" \"Why, Bob, we had nothing to hide?\" \"That's true, Jane, but let's look ahead. We're going to have difficulty making our forecast this year, and our bonuses are on the line. Remember, we renegotiated our salary/bonus package to give us a chance at higher incentives, and we have to be careful.\" \"Looking ahead, we've got a problem with obsolete inventory that's sure to come to require discussion for a second year in a row. We've got the warranty problem with the electrical harness on mid-range machine which is going to cost us a bundle, but we want to spread the impact over the next three years when the customers discover the problem and we have to fix it up. And don't forget the contaminated waste spill we just hadhow much is that going to cost to clean up, if we ever get caught?\" \"These are potentially big ticket items. Bill Paige, the guy who is in charge of our audit, is not going to let these go by. He said the inventory problem was almost material this year and we had to argue really hard. You are a qualified accountant ; how can we handle this?\" \"Well, Bob, we could have some informal discussions with other auditorsmaybe even the ones at your old companyto see how they would handle issues like these. The word will get around to Bill and he may be more accommodating in the future, and will probably shave his proposed audit fee for next year when he meets with our Audit Committee next month. If you really wanted to play hardball, we could talk the Audit Committee into calling for tenders from new auditors. After all this time, it's logical to check out the market, anyway. We would have advance discussions during which we would sound them out on how they would assess materiality in our company's case. Our audit fee is getting pretty largealmost $50,000 this yearso some big firms will be really interested.\" \"Jane, let's play hardball. Get a list of audit firms together for the tender process, and I will approach the Audit Committee. Be sure to list some small firms, including Webster & Co., the firm auditing my old company.\" Questions 1. Who are the major stakeholders involved in this situation? 2. What are the ethical issues involved? 3. Is this situation unethical? Why and why not? 4. What should Jane do if Webster & Co. looks like the choice the Audit Committee will make and recommend to the board of directors? As Bill Adams packed his briefcase on Friday, March 15, he could never remember being so glad to see a week end. As a senior tax manager with a major accounting firm, Hay & Hay, on the fast track for partnership, he was worried that the events of the week could prove to be detrimental to his career. Six months ago, the senior partners had rewarded Bill by asking him to be the tax manager on Zentor Inc., a very important client of the firm in terms of both prestige and fees. Bill had worked hard since then insuring his client received impeccable service and he had managed to build a good working relationship with Dan, the Chief Executive Officer of Zentor Inc. In fact, Dan was so impressed with Bill that he recommended him to his brother, Dr. Rim, a general medical practitioner. As a favor to Dan, Bill agreed that Hay & Hay would prepare Dr. Rim's tax return. This week a junior tax person had prepared Dr. Rim's tax return. When it came across Bill's desk for review today, he was surprised to find that, although Dr. Rim's gross billings were $480,000, his net income for tax purposes from his medical practice was only $27,000. He discussed this with the tax junior, who said he had noted this also but was not concerned, as every tax return prepared by the firm is stamped with the disclaimer \"We have prepared the return from information provided to us by the client. We have not audited or otherwise attempted to verify its accuracy.\" On closer review, Bill discovered that the following items, among others, had been deducted by Dr. Rim in arriving at net income: a.$15,000 for meals and entertainment. Bill felt that this was excessive and probably had not been incurred to earn income, given the nature of Dr. Rim's practice. b. Drycleaning bills for shirts, suits, dresses, sweaters, etc. Bill believed these to be family drycleaning bills that were being paid by the practice. c.Wages of $100 per week paid to Dr. Rim's twelveyearold son. Bill telephoned Dr. Rim and had his suspicions confirmed. When Bill asked Dr. Rim to review the expenses and remove all that were personal, Dr. Rim became very defensive. He told Bill that he had been deducting these items for years and his previous accountant had not objected. In fact, it was his previous accountant who had suggested he pay his son a salary as an incomesplitting measure. The telephone conversation ended abruptly when Dr. Rim was paged for an emergency, but not before he threatened to inform his brother that the accounting firm he thought so highly of was behind the times on the latest tax planning techniques. Bill was annoyed with himself for having agreed to prepare Dr. Rim's tax return in the first place. He was afraid of pushing Dr. Rim too far and losing Zentor Inc. as a client as a result. He could not anticipate what Dan's reaction to the situation would be. Bill was glad to have the weekend to think this over. Just as Bill was leaving the office, the tax senior on the Zentor Inc. account informed him that the deadline had been missed for objecting to a reassessment, requiring Zentor Inc. to pay an additional $1,200,000 in taxes. The deadline was Wednesday, March 13. The senior said he was able to contact a friend of his at the Tax Department, and the friend had agreed that if the Notice of Objection was dated March 13, properly signed, and appeared on his desk Monday, March 18, he would process it. Bill left his office with some major decisions to make over the weekend. Questions 1. Identify the ethical issues Bill Adams should address. 2. What would you do about these issues if you were Bill
