ETHICAL DILEMMA
Ethical Dilemma
• A situation a person faces in
which a decision must be
made about the appropriate
behavior.
• A dilemma exists because the
options given are 100% neither
correct nor incorrect.
Resolving Ethical Dilemmas
Illustration
1. Relevant Facts
Bert Cruz has been working for 6 months as an associate for an audit firm, Alvendia, Casto &
Associates. Currently, he is assigned to audit Ryan Manufacturing Company under the supervision of
Carlos Reyes, an experienced senior associate. There are three associates assigned to the engagement,
including Bert, Carlos and more experienced associate. Martha Sy.
During lunch on the first day, Carlos says, “It will be necessary for us to work a few extra hours on our
own time to make sure we come in on budget. This engagement isn’t very profitable anyway, and we
don’t want to hurt our firm by going over budget.
We can accomplish this easily by coming in a half hour early, taking a short lunch break, and working an
hour or so after normal quitting time. We just won’t write that time down on our time report.”
Bert recalls reading in the firm’s policy manual that working hours and not charging for them on the
time report is a violation of Alvendia, Casto & Associates employment policy. He also knows that
seniors are paid bonuses, instead of overtime, whereas associates are paid for overtime but get no
bonuses.
Later, when discussing the issue with Martha, she says, “Carlos does this on all of his job. He is likely to
be our firm’s next manager. The partners think he is great because his job always come in under budget.
He rewards us by giving us good engagement evaluations, especially under the cooperative attitude
category. Several of the other seniors associates follow the same practice.”
Illustration
2. Ethical Issue
The ethical issue in this situation is not difficult to identify.
• Is it ethical for Bert to work hours and not charging them as hours
worked in this situation?
3. Who is affected and how is each affected?
There are typically more people affected in situations in which ethical
dilemmas occur than would normally be expected. The following are the
key persons involved in this situation:
Illustration
3. Who is affected and how is each affected?
Who How affected
Bert Being asked to violate firm policy
Hours of work will be affected
Pay will be affected
Performance evaluation may be affected
Attitude about firm may be affected
Martha Same as Bert
Carlos Success on engagement and in firm may be affected
Hours of work will be affected
Alvendia and Castro Stated firm policy is being violated
May result in under billing clients in the current and future engagements
May affect the firm’s ability to realistically budget engagements and bill clients
May affect the firm’s ability to motivate and retain employees
Staff assigned to Ryan May result in unrealistic time budgets
Manufacturing in the future May result in unfavorable time performance evaluations
May result in pressures to continue practice of not charging for hours worked
Other staff in firm Following the practice of this engagement may motivate other to follow the same practice
on other engagements.
Illustration
4. Bert’s Available Alternatives
• Refuse to work the additional hours
• Perform in the manner requested
• Inform Carlos that he will not work the additional hours or will change the
additional hours to the engagement.
• Talk to manager or partner about Carlos request
• Refuse to work on the engagement
• Quit working for the firm
Each of these options includes a potential consequence, the worst likely one
being termination by the firm.
Illustration
5. Consequences of Each Alternative
In deciding the consequences of each alternative, it is essential to
evaluate both the short and long-term effects. There is a natural tendency
to emphasize the short term because those consequences will occur
quickly, even when the long-term consequences will occur quickly, even
when the long-term consequences may be more important. For example,
consider the potential consequences if Bert decides to work the additional
hours and not report them. In the short term, he will likely get good
evaluations for cooperation and perhaps a salary increase. In the longer
terms, what will be the effect of not reporting the hours this time when
other ethical conflicts arise?
Illustration
5. Consequences of Each Alternative
Consider the following similar ethical dilemmas Bert might face in his career
as he advances:
• A supervisor asks Bert to work 3 unreported hours daily and 15 unreported
hours each weekend.
• A supervisor asks Bert to initial certain procedures as having been performed
when they were not
• Bert concludes that he cannot be promoted to manager unless he persuades
assistants to work hours that they do not record
• Management inform Bert, who is now a partner, that either the company gets
a P400,000 legal fee or the company will change lawyers.
• Management informs Bert that the legal fee will be increased P50,000 if Bert
can find a plausible way to increase probability or winning the case
Illustration
6. Appropriate Action
Only Bert can decide the appropriate option to select in the
circumstances after considering his ethical values and the likely
consequences of each option. At one extreme, Bert could decide that the
only relevant consequence is the potential impact on his career. Most of
us would conclude that Bert is an unethical person if he follows that
permits even one supervisor to violate firm policies. Many people would
consider such an extreme reaction naïve.