Your audit client, Germane Industries, has developed a new financial instrument, the major purpose of which is to boost earnings and to keep a significant amount of debt off the balance sheet. Its investment banker tells the firm that the instrument is structured explicitly to keep it off the balance sheet, and that she has discussed the treatment with three other Big Five firms that have indicated some support for the client's position.
The transaction is not covered by any current authoritative pronouncement. Your initial reaction is that the item, when viewed in its substance as opposed to its form, is debt. The client reacts that GAAP does not prohibit the treatment of the item it advocates, and that the financial statements are those of management. The client notes further, and you corroborate, that some other firms would account for the item in the manner suggested by management, although it is not clear that a majority of other firms would accept such accounting.

Required
a. What is the ethical dilemma?
b. Does competition lead to a lower ethical standard in the profession?
c. What safeguards are built into the profession's standards and Code of Professional Conduct that would mitigate the potential effect of competition on the quality of the profession's work?