HEADING?

Garcia, Diana Rose

Gonzaga, Jasmine
Madriaga, Michelle
Manding, Nicole
Mendiola, Jianne Niccole

Case 3

Summary
During the review of an extremely profitable clients financial control system, the
consultant discovers that the procedures being used by the client are extremely out of date and
appropriate changes should be done. If the system continues, it may have a significant effect on
the data that goes into the financial statements. Now, a dissident stockholder questions the
effectiveness and efficiency of the controls. Also, during the course of review, the consultant
found out that the President himself designed the system and he may not accept the changes
that need to be done with the system. Any criticism of his work will upset him.
Assumptions

The dissident stockholder is one of the major stockholders

The company losses some of its profits due to the out dated financial control system
His client is a big corporation
The consultant has worked with the client before

Dilemma faced by the accountants

If he tells the situation as it is he might upset the president and he might be discharged
and he will lose an extremely profitable client.
If he soft-pedals the subject the management may not be able to realize the problem and it
may result to loss of profits to the company.

Ethical Considerations and Practice Standards applicable to the case

According to the Revised Code of Ethics for Professional Accountants in the Philippines
which is relevant also to Management Consultancy Services, A Professional Accountant
should act with Integrity. This means that he should be straight forward and honest. It
also implies fair dealing and truthfulness.

He should also be objective, not allowing bias, conflict of interest or undue influence of
others to override professional or business judgments.

Take the independent position with the client, making certain that advice to a client is based
on impartial consideration of all pertinent facts and responsible opinions

Alternative Course of Action

Tell the subject as it is

Pros

He would be able to uphold the standards of Management Consultants

The consultant will not violate any of the principles of the Code of Ethics for
Management Consultants such as Integrity and Objectivity.
He would be able to help improve the clients financial control system
The company would be able to avoid losses that may be due to out dated financial
control system

Cons

He might lose an extremely profitable client

He might lose other engagements due to the influence of the President

Soft Pedal the subject

Pros

He would be able to please the President and he would not be discharge as the
consultant of the company.
He would continue to earn a big profit from that company.

Cons

He will lose his integrity

The company might incur losses due to the outdated financial control system
The dissenting stockholder might remove his investments from the company

Best Course of Action with justification

The consultant should tell the situation as it is because as a consultant he must act with integrity
and give unbiased opinion. He should always act on the best interest of the company over his own
personal interest. In this case, he should take the risk of telling the company the problems with their
financial control system even if he might be discharge rather than soft pedal the subject and allow the
company to lose its profits that may even result to bankruptcy if left on its own. The Integrity, objectivity
and Independence of the consultant is not lost because the consultants findings were free from bias and
the impartial attitude of the consultant is maintained and it is also free from intentional distortions.
Independence is also preserved because the consultant did not let the threat of losing his job affect what
should be reported.
Case 4

Summary

Donald Wee, the president of Wee Corporation, is being offered by two consultants of
their services to design a payroll system that will allow the firm to save some of its cost. One of
the consultants, Darlene Zabio, offers her services on a contingent fee basis. She proposes that
her firm's fee will be 25 percent of the savings in payroll for each of the next four years. On the
other hand, upon being informed of this offer, Bill Zorro, the current auditor of the firm, likewise
claims that he could provide the same service for only P30,000.
Assumption

Zabio and Co. is a newly formed consulting firm.

The firm where Bill Zorro works does not know of his personal transactions with Donald
Wee

Dilemma faced by the consultant(s)

The two consultants who offered to make a payroll system are faced with the dilemma
with regards to whether or not the advertising of their service is in violation with the Code
of Ethics for Management Consultancy.

In Addition, Zorro is also confronted with the predicament on whether it is appropriate to

compare his services to another and if there will be any threats because his firm audits
Wee Corporation.

State the Ethical Considerations and Practice Standards applicable to the case

In marketing and promoting themselves and their work, professional, professional

accountants should not bring the profession into disrepute. The professional accountant
in public practice shall be honest and truthful, and not: make exaggerated claims for
services offered, make disparaging references or unsubstantiated comparisons to the
work of another.

Based also in the Code of Ethics for Management Consultants

It is not allowed to offer or render professional services under an arrangement
whereby no fee will be charged unless a specified finding or result is obtained or
whereby the fee is otherwise contingent on the findings or result of the service.
One should not advertise services in a manner that is false, misleading,
deceptive, self-laudatory, or in any other manner derogatory to the dignity of the
profession.

Alternative Course of Action

For Darlene Zabio:

Discontinue the proposal of making a payroll system for Wee Corporation

Pros

She will not violate any of the principles of the Code of Ethics for Management
Consultants.

Cons
The fee of 25% of the savings of the firm from the proposed payroll system will
not materialize.
Continue the proposal of making a payroll system for Wee Corporation
Pros

There will be an revenue of 25% of the savings of the firm from the proposed
payroll system for the next four years.

Cons
She will violate some of the principles of the Code of Ethics for Management
Consultants.
For Bill Zorro:
Persuade Mr. Donald Wee to choose his proposal instead of Zabios.
Pros

There will be a revenue of P30,000.

Cons
Zorro will be subject to the threat of Self-Review because his firm is also the one
auditing Wee Corporation.
Zorro will violate some of the principles of the Code of Ethics for Management
Consultants.
Dont propose to make a payroll system and compare with Zabios.
Pros

He will not be subjected to Self- Review threat

He will not violate some of the principles of the Code of Ethics for Management
Consultants.

Cons

The income of P30,000 will not realized.

Best Course of Action

The best course of action that both consultants must take is to cancel their proposal for
Donald Wee to make a payroll system. For Zabio, to discontinue their proposal, will not violate
any of the principles of the Code of Ethics for Management Consultants. As for Zorro, the

professional accountant in public practice shall be honest and truthful on marketing and
advertising their services, and not make disparaging references or unsubstantiated comparisons
to the work of another.