Dravid Luis and His Oppinions - Essay Example

1. What is the major ethical issue in this case? What are Dravid Luis’ options in this case (i.e. what can he do)? (3 marks) ANSWER: The major ethical issue in this case is whether Dravid Luis will be doing or not doing what Jimmy Westfield wants regarding the documentation of the worth of the equipment which is at $3,500,000 following its net realizable value. This is the major ethical issue as it creates a dilemma among the fundamental principles that govern the code of ethical actions within Dravid Luis’ field, accounting. In this case, the options that are open for Dravid Luis are: he can just follow the wish of Jimmy Westfield to record the value of the equipment using the net realizable value which is at $3,500,000. Or he cannot follow what Jimmy Westfield asks him to do and write $6,000,000 as the value of the equipment following his professional judgment that the proper way to determine its value is via using the current replacement cost for similar capacity. Or he can look for other estimates which he can offer to Jimmy Westfield. This suggestion is raised since Dravid Luis has based his valuation on just two estimates that he obtained. The number of estimates that he has obtained seems to be a little low considering that worth of the equipment that is being evaluated amounts to millions of dollars. Or he can consult another accountant regarding alternative options that may be offered to Jimmy Westfield to settle their difference in evaluating the worth of the equipment. 2. Assume you are in Dravid Luis’ position evaluate the ethics of going along with Jimmy Westfield’s desire to record the equipment at net realizable value from a utilitarian and rights perspective. (3 marks) ANSWER: Utilitarianism is basically the greatest happiness principle which holds that actions are right in proportion as they tend to promote happiness or pleasure and wrong if they tend to produce pain. (Mill 1861) However, it is important to note that there are two kinds of utilitarianism- act utilitarianism and rule utilitarianism. In act utilitarianism the consequence of the act should produce the greatest happiness to the greatest number of people (Velasquez 1999) while rule utilitarianism means that we should act so that the rules governing our action produce the greatest happiness for the greatest number of people. With utilitarianism as the ethical framework, we now analyze Dravid Luis’ going along with Jimmy Westfield’s desire to record the equipment at net realizable value. In the act utilitarianism, Dravid Luis’ act of going along with Jimmy Westfield’s wish is wrong because if you are simplistically going to count the number of all the stakeholders who will be happy or who will not incur any pain as a result of the disadvantage brought by a lower estimated cause of an asset, then the majority- Dravid Luis, possible investors in the future, and the third party finance company- will not be happy since they are not presented with the true value of the equipment. And as such they are deceived, since a lower depreciation amount could make the difference between showing profits instead of losses. And it seems that Westfield is the only one happy as he intends to sell off the equipment soon after the purchase which will yield a higher price following the use of replacement costs for its evaluation. Alternatively, if we are going to use rule utilitarianism, more difficulty is confronted since we have to know the rule that governs Luis’ action. Supposing that the rule Luis should follow is satisfaction of his client, in this case, it’s Jimmy Westfield, then what Luis has done is right. It’s the rule. On the other hand, if Luis ‘action of going along with Westfield will be analyzed using the rights perspective following Kantian ethics which hold two important maxims, namely “Act only on that maxim whereby thou canst at the same time will that it should become a universal law” and “So act to treat humanity, whether in thine own person or in that of any other, in every case as an end withal, never as a means only”(Kant 2002), then Luis’ act of going along with Westfield is wrong. For the following reasons: first, he allowed himself to be used as means towards Westfield gaining much advantage. And second, he cannot will that his act of lying in document can be universalized. He cannot will that other rational beings like him who may find themselves in the same ethical dilemma as Luis is in will do what he did- lie. 3. If you are Dravid Luis, identify three fundamental principles in APES 110 Code of ethics for Professional Accountants which would be of greatest concern to you while deciding the course of action to take in this case? What concerns would you have about your newly established employment relationship with Jimmy Westfield and NEWCO? (4 marks) ANSWER: The three fundamental principles that will highly influence my decision making regarding the course of action that I will take in face of this dilemma are “integrity, objectivity and professional competence and due care.” (APES110 Code of Ethics for Professional Accountants, 2006) Integrity, as an accountant, I should be fair and honest in all my dealings. My personal integrity and the integrity of the institution that I represent are always at stake in all my transactions. It is not only to protecting my name and selfhood but also protecting the institution where I belong. Objectivity, it is the only way that I can maintain and sustain my integrity – to be objective in all my dealings. This implies that I have to exert all efforts to be free from undue influences or threats as I fulfill my function as the accountant of the company. And finally, professional competence and due care. This is the best approach that will enable me to secure my integrity and objectivity in the performance of my job. Professional competency and due care assures the client that I possess the necessary skills and knowledge needed in the diligent performance of my job and that I have utilized all the necessary means and ways to ascertain that I am doing the right thing. Of course, as the fundamental principles will be a major part of the decision –making process, of same weight, are considerations pertinent to the repercussions of the decision in terms of how it will affect my relationship with my new boss – Jimmy Westfield. The first major concern is that he may terminate my services right away. Let us face it, he is the boss and owner of the corporation and he can fire me anytime. The other consideration that bothers me is that if I do not follow him, and since he is Jimmy Westfield a wealthy investor, he might use his influence so that I’ll have some difficulty in finding new clients. We know that in the accounting business the best way to advertise your services is by word of mouth of your clients. And if a well-known investor like Jimmy Westfield is displeased with my services then it’s detrimental to my career. My final concern me is that he may sue me for insubordination, since he has given a clear directive as to what I should do and yet I did not follow him. With regards to NEWCO, my primary concern is that it is a shell corporation and in corporations like this there is a thin line which defines it as between legal and/or illegal Corporation. The seeming lack of guidelines for is another concern.LBO 4. Assuming that Dravid Luis chose not to go along with Jimmy Westfield’s desire to record the equipment at net realizable value, justify the reason why he would not modify the asset value at each of the six stages of Cognitive and Moral Development as outlined in the Kohlberg framework. Which stage of the Kohlberg framework does Jimmy Westfield appear to be and why? ( 5 marks) ANSWER: In each of the six stages of the Cognitive and Moral development in the Kohlberg framework (Reiter 1996), Dravid Luis’ action of not going along the wish of Jimmy Westfield to record the equipment at net realizable value can be justified. In stage one wherein individual avoids punishment, Dravid Luis can justify his action by claiming that there are clear punishments regarding the action that Westfield plans to do. And that the only that way he can protect himself from the punishment is not to follow him. In the second stage which is characterized by individuals who are motivated by satisfaction of their needs. Dravid Luis can use as an argument for his action the Maslow’s hierarchy of needs. According to Maslow (1943) human needs are not just constrained within the boundaries of physiological needs. Higher up the triangle are human needs for belonginess, self-esteem, self-actualization, and transcendence. And in Dravid Luis’ case, not following Westfield is essentially satisfying these higher human needs. In stage three which is described by group norms providing motivation, Luis can argue that by following the reorganized “Maslow’s and Alderfer's hierarchies” (Huitt 2004) which claims that motivation for action stems the importance of relatedness and that this factor is of integral importance in the attainment of growth. And following the norms provided by group where Luis belongs ascertains his position and relation within the group. In stage four where laws or rules set by the society act as a guide in solving the conflict. Luis can claim that the rules on how accountants like him should conduct their dealing with their clients are quite specific. Though the examples to show the actual application of the principles and concepts are limited, it does not mean that it cannot address similar issues. As such, since principles and guiding rules are clear, then he has to follow. Thus, affirming the law and order morality. In stage five, wherein the capacity to take in the interests of all the parties involved is emphasized, Luis can claim that after weighing and evaluating all the necessary factors in making the decision – the interests of all the stakeholders in the case- he has come up with the decision that the best action to be taken is not follow Jimmy Westfield’s wish. And finally the last stage, stage six, the creation of the moral principle. Luis can claim that whatever action he will make, its validity goes beyond their particular transaction. The ‘universalizavility’ of his act lie on the fact that the public sphere is shared with other rational human beings who just like Luis can move beyond self-greed and come up with universal principles that will allow human flourishing not just for one or two individuals but for all persons involved. On the other hand, looking at the action of Jimmy Westfield – his desire to use the net realizable value of the equipment in the documentation – he is in stage two of the Kohlberg’s framework. This claim is based on the following reasons. First, he is motivated by greed. In stage two, when much focus is on satisfying basic needs at the lowest level – physiological needs - people tend to be trapped in the boundaries of securing ‘unlimited wealth’ to the point of becoming ruthless, greedy and blinded to the authenticity of their actual need. Second, Westfield is in stage two because his basic question is ‘what’s in it for me?’ His utter disregard to the moral sensibilities of Luis shows that his interest is to protect only his own interest. And finally, he is in stage two because his self-interests govern his manner of dealing with Luis and the people around him. BIBLIOGRAPHY: APES110 Code of Ethics for Professional Accountants. (2006). Accounting Professional & Ethical Standards Board. Huitt, W. (2004). Maslow's hierarchy of needs. Educational Psychology Interactive. Valdosta, GA: Valdosta State University. Retrieved [5 October 2009] from, http://chiron.valdosta.edu/whuitt/col/regsys/maslow.html. Kant, I.(2002). The Foundations in the Metaphysics of Morals. Trans byT.K. Abbot. IN Philosophy: The Quest for Truth 5th Edition by Louis P. Pojman. Oxford: Oxford University Press. Maslow, A. (1943). A theory of human motivation. Psychological Review, 50, 370-396. Mill. J. (1965). Utilitarianism. In Essential Works of John Stuart Mill. Ed by Max Lerner. New York: Bantam Books. Reiter, S. (1996). The Kohlberg-Gilligan controversy: Lessons for accounting ethics education. Critical Perspectives on Accounting, 7, pp 33 – 54. Velasquez, M. (1999). Philosophy: A Text with Readings 7th Edition. Belmont, CA: Wadsworth Publishing Company. Read More