Question

Juan Gomez was the fastest-rising star of a small CPA firm in West Palm Beach, Florida. Most of his clients traveled in stratospheric circles of wealth, and Juan knew that fitting in with this crowd was essential to his career. Although he made good money, it wasn’t enough to live that kind of lifestyle. Meanwhile, Juan had become friends with one of his clients, Tony Russo. Knowing Russo’s books inside and out and being on close terms with him, Juan asked Tony for a personal loan. Juan was sure he’d be able to pay it back when he got his next bonus, but things stretched out, and additional loans were made. Two years later, Tony’s company hit some losses, and the numbers were looking grim. Tony reminded Juan that it would not look good for his career if his CPA firm knew Juan had borrowed from a client, and so Juan changed a few numbers and signed off on clean financials for Tony’s firm. This went on for three years, until one morning when Juan got a call. Russo had died; his sons had gone through the books, and the whole scheme came out. Juan did some prison time and lost his license, but he was repentant and made an instructional video for accounting students to warn them of the temptations they may encounter in the real world of business.

1. Although the central character of this story worked in public accounting, please refer to the IMA Statement of Ethical Professional Practice in Exhibit 16-3 and discuss which of those issues are reflected in this case.
2. Could Juan have removed himself from his situation? How?

Answer 1

Answer:

* As the accountant of the company Juan should have seperate relationship (business and personal) with Tony. Tony might be personally involved when he is going for acceptance of loan because he knows about the repayment of the loan (Fidelma W.,1999). Tony also violates the various standards related to integrity because this was a major conflict of interest in terms of the ability to carry of his duties in ethical way. Juan will not disclose any related information because this gives false information about the company financial position that will influence the investing (Robyn M., Jane H., Fiona c.,2011). There is also violation related to the competence because he failed to perform the duties according to the prescribed laws and regulations.

*Juan knows very well he would have to do repayments of all borrowed amount. When Juan aware about the same he might face difficult in repayments, Juan will discuss the situation with superiors before the client looking for advantage of the situation.