Topics: Auditing, Financial audit, Audit Pages: 9 (2960 words) Published: January 3, 2014
1. Define the terms ethics and professional ethics. Using the following scale, Evaluate the conduct of each individual involved in this case. -100 . . . . . . . . . 0 . . . . . . . . . 100

Highly Highly Unethical Ethical

Ethics is moral principles that govern a person's behavior or the conducting of an activity. "Ethics in business" is the behavior that a business adheres to in its daily dealings with the world. The ethics of a particular business can be diverse. They apply not only to how the business interacts with the world at large, but also to their one-on-one dealings with a single customer.

Professional ethics encompass the personal, organizational and corporate standards of behavior expected of professionals. Professionals and those working in acknowledged professions, exercise specialist knowledge and skill. How the use of this knowledge should be governed when providing a service to the public can be considered a moral issue and is termed professional ethics

Evaluate the conduct of each individual involved in this case. -100 . . . . . . . . . 0 . . . . . . . . . 100
Highly Highly Unethical Ethical
There are 7 individual involved in this case
1.Robert Levin, Chief Operating Officer
2.Dennie Brown, Chief Accounting Officer
3.Walter Richardson, Vice President of Data Processing
4.Steven Bedowitz, Chief Executive Officer
5.Mac Martirossian, Chief Financial Officer
6.Edward Smith, audit engagement partner
7.Joel Reed, senior audit manager

2. Do you believe that the individuals who behaved unethically in this case were appropriately punished? Defend your answer.

Each of the American Remodeling (AMRE) executives who participated in the fraud was punished in some way. Bedowitz, Levin, Brown, and Richardson were punished financially even though they never admitted nor denied their alleged roles in the fraud. They suffered fines and others like Levin and Brown had to pay back the proceeds from the sale of AMRE stock. Upper executives, Bedowitz and Levin, along with AMRE Inc. had to payout in an agreement to settle a large class action lawsuit with stockholders of AMRE. Jail time was not a punishment for any of the executives even though they knowing participated in the fraud. Sarbanes- Oxley (SOX) Act of 2002 would have changed the outcome of many of their punishments. The perpetrators could have faced imprisonment of up to 10 or 20 years for the fraud if SOX was in place. Martirossian may be aware that the fraud had happened and tried to correct it by making prior period adjustments; however, he did not follow certain conducts that professionals should follow. Martirossian did not take proper measures in correcting AMRE's accounting records when not disclosing the fraud to Price Waterhouse. The individuals that perpetrated the fraud did try to fix the fraud after they realized that the fraud had become too large for them to handle. They offered to give back their assets in the company to make the adjustments needed to fix the books to how they should be presented. While the fines and lawsuits justified the perpetrators behavior they still were not in the right to do what they did. The fraud could have extended much more harm to the shareholders and stakeholders of the company.

3. Identify the alternative courses of action available to Martirossian when he became aware of the accounting fraud at AMRE. Assume the role of Martirossian. Which of these alternatives would you have chosen? Why?

After reading this case, I felt Mac Martirossian had a few alternatives that he could have taken instead of the path he took. The first alternative was just deciding to resign as soon as he found out about the fraudulent activity taking place in AMRE, Inc. With knowledge that a fraud has been taking place for a long time prior to Martirossian working for AMRE, I found it to be...
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