What do you do now? Ethical dilemmas for CAs
7 Nov 08
Case study 2: Temptation at the tender. You’re working on your pitch for the crucial final stage of an audit tender that will be vital for you and your firm. Then the prospective client’s chief internal auditor offers to fax over your rivals’ presentation, complete with costings. What do you do?
This case study is taken from What do you do now? Ethical issues encountered by chartered accountants published in May 2008 by ICAS (click here for a free download). Author Dr David Molyneaux, a specialist in business ethics with the University of Aberdeen, gathered stories of real-life ethical conflicts and dilemmas from CAs, changing the details to protect the privacy of those concerned, and adding an analysis of where the key ethical issues arise.
In this scenario, you are a partner in a multi-national firm working on a pitch for the audit of a medium-sized financial institution with your marketing manager, Fiona. The pressure is on – recently, too many of your pitches in your sector, financial services, have been unsuccessful, and there have been client losses that you have not been able to replace. The jobs of several people could depend on winning this – including of close team members and, quite probably, your own!
The signs are hopeful. The invitation to tender has come two years earlier than might have been expected, perhaps indicating that the company is really looking for a change. Also, you have just had a phone conversation with your counterpart in the US office. The prospective client has a subsidiary there and may be looking to make further acquisitions in the US. Your American colleague has made it clear he would be able to be flexible on sharing costs, support and fees to win such a potentially important client.
Then you get a call from Trevor, the prospective client’s chief internal auditor. You don’t know him well, but he is an alumnus of your firm. The upshot is that he would prefer to see a change of auditor. Trevor thinks he would find working with your firm more constructive than with the “nitpicking” incumbents.
The problem, he explains, is that the other firm’s team have drastically reduced their projected fees, and that may be enough to swing the decision their way. Trevor adds: “I am pretty sure that your first round proposal was leaked. This place has a deserved reputation as a sieve.”
To redress the perceived balance, Trevor says he will fax across you competitors’ presentation slides, including critical information about their pricing. As he puts it: "All’s fair in love and war.”
Fiona, who has been listening in – you put the call on speakerphone – is delighted and rushes to collect the incoming fax. What will you do when she comes back with it?
Reading the fax should help you to win a vital audit pitch for your firm, preserving your colleagues’ jobs - but it would also mean colluding in a serious breach of confidentiality. Could you ever be an independent or impartial auditor in such circumstances? What would be your relationship with Trevor? What would you do if the story later came out?
Alternatively, you could shred the fax without reading it, say nothing about it and simply factor in the cost savings your US counterpart is offering. You would not have looked at the confidential information – but you would still have benefited from the inside information that your competition was trying to “lowball” your price.
Even if you do not take advantage of the faxed slides, you still have to decide whether to inform the board at your prospective client of Trevor’s breach of trust, or indeed report Trevor to his professional body. Either route is likely to see this pitch written off, from your point of view. How do you explain your decision to Fiona, to your staff and to fellow partners?
WHAT DO YOU DO NOW?
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