To resign or to serve Background of case: The Prairieland Bank was a medium-sized, Midwestern financial institution and their management have a good reputation for backing successful deals. Since their profit was decrease, it has caused their management start to renegotiate many loans. Ben Hunt who is the audit partner on the Prairieland Bank was concern to give an opinion on the fairness of their business financial statement. This is because the provision for doubtful loans is too low even they have taken many loans. During the interview to discuss this problem with the CEO and Vice President of finance, he was told that they already know it but they didn’t want to increase the provision as their profit will decrease. In addition, Ben was
The client also will incur another cost to appoint new auditor to audit their financial statements.

Not ethical

Is the decision legal?

According to the law and regulations, auditors have their duty to act honestly and it is their responsibility to give or express an opinion on the fairness of their client’s financial statements. Here, Ben and James resignation is due to their concern about the risk associated if they continue to serve Prairieland Bank and ignore the changing of some accounting policies made by the client’s management, which is illegal. If they continue to serve Prairieland Bank, they are deemed to disobey their responsibilities, which is wrong. Therefore, the decision made by James and Ben to resign is considered legal. Ben and James’s decision to resign is considered fair because they deserve to choose whether to resign or to continue serve the client. If they resign, they can maintain the firm’s credibility and reputation as auditors. While, Prairieland Bank will not actually take the greatest burden as it still can appoint a new auditor (Jack Lane) to audit its financial statements.

Ethical

Is the decision fair?

Ethical

Is the decision is the right

As auditors, Ben and James have the right choose whether to continue serve Prairieland Bank or to resign. Here, their decision is considered as

Ethical

3

To resign or to serve thing to do? the right thing to do