The case study discusses an ethical dilemma faced by Jennifer Grace, an audit manager who discovers discrepancies between the financial statements of her client, Fantastic Developments, and her knowledge of the company's struggles. Despite evidence pointing to possible misrepresentation, the CFO, Tom Ward, is evasive and informs her that Fantastic has chosen a different CPA firm. The case highlights the challenges in balancing client confidentiality, the responsibilities of auditors, and the potential ramifications of fraudulent financial reporting.

1. Case Study:
Conflicting Clients
Topic:
Auditing (Confidentiality, Misrepresentation of Facts)
People Involved:
Jennifer Grace, First year member of her CPA firm’s
management group
Tom Ward, CFO of Fantastic Developments, Inc., a client
While reviewing the current-year audit working papers of
Coshocton National Bank (CNB), the engagement manager,
Jennifer Grace, noted something curious. In the working papers
related to loan valuation, Jennifer saw that the commercial loan
of Fantastic Developments had been randomly selected for
confirmation but that Fantastic had not responded to either the
initial or second confirmation request. The audit staff disposed
of this “loose end” by alternate procedures: examining cash
collections (which had become somewhat sporadic) and
vouching to underlying loan documentation, including a set of
recent (unaudited) financial statements that showed Fantastic’s
solid financial position and operating profitability.
Jennifer noted this reference to Fantastic Developments because
this private company was also a client of her firm. In fact,
Jennifer had served as the audit senior on the prior-year audit of
Fantastic. She knew that the company had been struggling for a
couple of years and had experienced recurring operating losses.
Her knowledge of Fantastic did not reconcile with the
discussion in the audit working papers related to the financial

2. statements furnished to the bank.
When Jennifer contacted Fantastic’s CFO, Tom Ward, and
inquired about the company’s apparently miraculous
turnaround, he was noncommittal and unhelpful. Tom replied
that business had picked up. He apologized for not calling
Jennifer’s firm himself because he had been so busy, and then
he told her that Fantastic had decided to engage another CPA
firm for its accounting and auditing needs. Although confused,
Jennifer obviously couldn’t reject the possibility that this abrupt
dismissal was a direct consequence of her inquiry.
As a result, Jennifer wonders whether the financial statements
which Fantastic furnished to the bank as a basis for a loan
application are fraudulent. The bank apparently has no such
suspicion, however.
_______________________________________________
Use the
Instructions for Case Analyses
to craft a response to this case, articulating the main issues and
ethical dilemma. Review the assessment criteria below before
you begin writing.
Submit a written paper which is 2-3-pages in length exclusive
of reference page and that is double-spaced. You should cite
relevant resources in APA format.
Papers will be assessed using the following criteria:
The Written assignment:
identifies all the relevant facts of the case

3. articulates overarching ethical issues including the extent of
Jennifer's responsibility to take action; how the interests of the
firm (and stockholders) can be balanced against the
environmental interests; what obligation the company has to
future generations and citizens.
identifies all stakeholders
poses possible alternatives and ethics of each alternative. Paper
should explore the possible alternatives and ethics from the
Utilitarian Perspective, the Rights Perspective,
or
the Justice Perspective
identifies all practical constraints
recommends a specific action Jennifer should take
is of high quality, writing is clear and professional
conforms to the structural requirements including APA style
guidelines for References.