As Gerard sat down in his expensive new chair, he was worried. What had he gotte

Question

As Gerard sat down in his expensive new chair, he was worried. What had he gotten himself into? How could things have gone so wrong so fast? It was as if he’d been walking and some truck had blindsided him. Gerard had been with Trawlers Accounting, a medium-size firm, for several years. His wife, Vicky, had a job in the pharmaceutical industry, and their first child was due any day now. The doctor had told her that she would need to stop work early because hers was a high-risk pregnancy. So three months before her due date, she asked and received a four-month leave of absence. This was great, but the leave was without pay. Luckily, Gerard had received a promotion and now headed a department. Some interesting activities were going on in the accounting industry. For example, Gerard’s superior had decided that all CPAs would take exams to become registered investment advisers. The rationale for such a new development was simple. The firm could use its relationships with clients to increase investment revenues. Because of the long-term nature of these relationships with many firms and individuals as well as the implicit sense of honesty that CPAs must bring to their jobs, clients understood that a violation of so high a trust was unlikely—or so Gerard’s boss argued. Many of the people in Gerard’s department didn’t like this new policy; however, some who had passed the exams increased their pay by 15 percent. During lunch, one of Gerard’s financial friends engaged him heatedly. “What you’re doing, Gerard, is called unfair competition,” the friend accused him. “For example, your CPAs have exclusive access to confidential client taxpayer information, which could give you insight into people’s financial needs. Besides, you could easily direct clients to mutual funds that
you already own in order to keep your own personal investments afloat. Also, if your people start chasing commissions and fees on mutual funds that go bad, your credibility will become suspect, and you won’t be trusted. Plus, your people will now have to keep abreast of financial, tax, and accounting changes.” When Gerard got to his office, he found that some of his people had been recommending a group of mutual funds that Trawlers had been auditing. Then someone from another of his company’s accounting clients, CENA Mutual Funds, telephoned. “What’s the idea of having your people suggest PPI Mutual Funds when they are in direct competition with us?” the caller yelled. “We pay you a lot, Gerard, to do our accounting procedures, and that’s how you reward us? I want to know by the end of the day if you are going to continue to push our competitor’s product. I don’t have to tell you that this will directly affect your department and you. Also, things like this get around the business circles, if you know what I mean.” With these words, the caller hung up on Gerard.
QUESTIONS • EXERCISES 1. Identify any ethical and legal issues of which Gerard needs to be aware. 2. Discuss the advantages and disadvantages of each decision Gerard has made and could make. 3. Discuss the issue of accounting firms going into the financial services market. 4. Discuss the type of groups that are influencing Gerard.

Explanation / Answer

1. Identify the ethical and legal issues of which Gerard needs to be aware.

Ethical Issues-Gerard need to be aware of the issues hes wife meaning that she pregnake, There only one income coming in the house hold. Plus, It seem like Gerard have a lot thing to going. Plus on his job it seems like that an issues dealing. For instance, Gerards department didnt like the policy, Meaning he was also heated discussion with hes co-worker. Legal Issues- Gerard wife Vicky is pregnancy and she only allow getting three month for pregnancy leave. But the down fault from that is that she does not received medical funds

2. Discuss the advantages and the disadvantages of each decision Gerard has made and could make.

Advantages- Well, if Gerard can try to fix the policy to everyone benefits so they can understand or help them to understand the issues that is at hand or to their benefit the c Disadvantages- The disadvantages is that he didnt talk or come to some kind of agreement with his co-worker and not to think about his boss. Wow its a good chance that he going to mess up long-term nature of these relatship, aswell so of the honesty that CPAs must bring home to their job.

3. Discuss the issues of accounting firms going into the financial services market.

It doesn't sound like a good idea to me to combine these two companies together under one roof. I am not saying that one person can't own both of these companies at the same time, but they should be kept separate as two different entities. When in the accounting business, you have to remain faith to your clients, because they might happen to be in the business of mutual funds, which is an investment company. If you gave your client advice where they could get a better investment return by going to a different mutual fund investment.

4. Discuss the types of groups that are influencing Gerard.

The types of groups that are influencing Gerard are someone from another of his company's accounting clients, CENA Mutual Funds, telephoned.

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