Recommendations
Actively engaging in and even being an accessory of an auditing process that involves falsification or voluntary omission of required elements to be audited is not only unethical but also illegal. Most companies falsify their auditing reports so that they can pay smaller amounts in taxes and other expenses.
In Sue’s case, she is well aware that what her company is doing with its auditing reports is illegal because it is practically waiving the employee taxes that it should pay to the government by means of voluntary non-declaration or misclassification of assets and resources. Both the senior auditor (Sue’s boss) and the senior partner of the firm, know that this is illegal and they even encouraged Sue to just confirm with the clearly unethical process of auditing in the firm but Sue is having second thoughts because if things go wrong and an authorized external regulatory body finds out about their falsified audit reports, her name would most likely appear in the list of suspects because she was one of the auditors who worked on that report and secondly, because under the law, she is morally and legally obliged to ensure that all contents of the audit reports that they submit are authentic and not in any way falsified.
In this case, Sue can take three options. The first option involves reporting the unethical auditing process to the authorities. In this option, her colleagues would most likely be prosecuted but she will be saved from the prosecution because she was the one who reported it. However, his colleagues may tag her as an employee who is not a team player or even anti-social.
The second option involves confirming to the unethical auditing processes in the firm and swallowing her pride and integrity. The benefit of this option is that no one will go to jail and she will be continued to be liked by her colleagues at work.
The third option is to just leave the company and look for work in a company that does not engage in unethical business practices. That way, just like in option two, no one goes to jail and she will still be liked by her colleagues, however, in this option, she will be the one who will do all the adjustment.
Among the three options that Sue has, the best and most feasible option, from an ethical perspective, is the first option. By reporting the unethical and illegal auditing process that the firm has admitted it has been committing for a long time already to the authorities, they will be taught a lesson that they cannot forget and Sue will also be saved from being prosecuted and she would also be able to tell herself that she did the right thing.
References
Bentley, K., Omer, T., & Sharp, N. (2013). Business Strategy, Financial Reporting Irregularities, and Audit Effort Business Strategy, Financial Reporting Irregularities, and Audit Effort. Contemporary Accounting Research, 780-817.
Lerong, H., & Rong, Y. (2014). Does Industry Regulation Matte? New Evidence on Audit Committees and Earnings Management. Journal of Business Ethics, 573-589.
Persons, O. (2009). Audit Committee Characteristics and Earliers Voluntary Ethics Disclosure among Fraud and non-Fraud Firms. International Journal of Disclosure and Governance, 284-297.
