ners’ assessment of her team’s performance on
these audits has prompted her to consider using
the Q-Analytics software downloaded from the
Internet site. She believes that her team could
quickly become proficient with the software and
complete the two audits under budget.
Debbie approaches her team and provides the
link to the Q-Analytics software for each auditor
to load onto their computers. Given that this is not
standard protocol for software installation, several
team members are concerned about installing the
software. However, Debbie assures them that she
is conducting a study to evaluate the efficiencies
gained by using the software, to find support for
purchasing licenses. She reminds them that poor
year-end performance evaluations could affect
raises and promotions.
The following individuals and society may be
affected by Debbie’s decision.
Appendix D: INSTRUCTIONAL CASE
Q-Analytics: An Ethics Case on
Unlicensed Software
I
n the midst of a busy audit season for Davis, Upton, Crow, and Kerry, LLP, a local
accounting firm, Debbie Sabine finds herself trying to increase the efficiency of her
audit team’s detailed testing procedures to help
manage the audit within the established budget.
As Debbie has recently moved from a Big-4 accounting firm, where she was a senior auditor, to
the role of audit manager at a much smaller firm,
the partners of the firm have high expectations for
her. Considering ways to reduce the number of
hours required for testing, Debbie recalls the efficiency benefits of performing computer assisted
audit techniques (CAAT’s) with a generalized
audit software package, Audit Query Language
(AQL), at her prior firm. Debbie was thoroughly
experienced with AQL, and believes that, if she
could get the firm to purchase the software, the
time to conduct detailed audit testing procedures
could be reduced by 20%, resulting in reduced
expenses, increased profitability and improved
audit quality through additional testing.
She can see, however, that the partners at her
new firm are not interested, as a result of limited
computer skills of their staff and their own lack of
direct knowledge of the software’s benefits. Debbie has not been able to convince them to purchase the AQL software until she can clearly justify the expense with additional revenues.
While researching and analyzing the costs and
benefits of generalized audit software packages to
present to the firm partners, Debbie found a website with an unprotected copy of Q-Analytics, a
recent commercial entrant to the generalized audit
software market. It is very similar to, and perhaps
better than, the application at her prior firm. With
growing concerns of exceeding the budgets for
two of the audits she is managing, Debbie finds
herself in a dilemma concerning whether to download the software and provide it to her staff with a
quick training overview to reduce the time required to complete audit testing. During her first
two audits, Debbie experienced client issues resulting in more hours to complete the audit than
originally budgeted. Her concerns about the part-
Sean Robin, Developer and Programmer of QAnalytics
Two years ago, Sean Robin resigned from an
audit position at a Big-4 accounting firm to develop a software application to perform routine audit
procedures of transactional data maintained in
databases. Sean’s vision was to increase the effectiveness of audit testing by allowing rapid testing
of 100% of transactions. As a result, Sean forwent
$90,000 worth of salary and incurred $100,000 of
expenses in the planning and development of the
software. Q-Analytics was copyrighted and is
marketed by Business Tools, Inc., for $3,000 per
individual license, with discounts based on the
number of licenses. The licensing revenues cover
royalties to Sean for each copy (30%), plus Business Tools, Inc.’s production and marketing costs
and profit. To date, the software has generated
total revenue of nearly $150,000. A recently published professional journal survey has indicated
that, on average, the software reduced the time
required for detailed testing by 15% during initial
implementation, thus creating high expectations
for future sales. A friend has asked Sean about the
software distributor’s security policies, including
techniques such as hardware keys, raising additional concerns for Sean.
14
ence the upcoming annual review and promotion
process. As a result, the members of Debbie’s
team are anxious to demonstrate their abilities and
value to the firm to strengthen performance reviews—and their case for a raise and promotion.
However, to a certain extent, senior members
view Debbie as an outsider who may have reduced their potential for promotion by coming in
as a manager, and carry some animosity toward
her.
The firm requires staff members to have completed the CPA exam before being eligible for
promotion to senior-level auditor. As a result of
recent completion of college coursework and
preparation for the CPA exam, both seniors and
staff members are keenly aware of the ethical requirements associated with the CPA designation.
However, seniors and staff members are not aware
of the specific penalties associated with failure to
meet such ethical standards of the firm or the profession. In addition, as most of the seniors and
staff members completed their education within
the past 5 years, most have firsthand experience
related to copying music and software for personal use.
Laura Horton, Director of Sales, Accounting
Applications at Business Tools, Inc.
Laura is Director of Sales for the small software distribution company that publishes QAnalytics; the company has annual revenue of
$50M and specializes in accounting, finance, and
economic modeling software applications. Customers purchasing fewer than ten copies of the
software are provided a hardware key which must
be inserted in the computer’s USB port while the
application is in use. To reduce costs associated
with lower license fees for larger licensees, customers purchasing more than ten licenses receive
a modified version of the software which does not
require a hardware key but only a password and
web registration. Laura has recently become concerned that hackers or pirates may circulate unprotected copies.
Debbie Sabine, Audit Manager, Davis, Upton,
Crow, and Kerry, LLP
Despite frequently working more than 70
hours a week for much of the past three years as
an auditor for a Big-4 CPA firm, Debbie fulfilled
testing and experience requirements to become a
CPA. While at that firm, Debbie continuously focused on processes within her audits to more efficiently perform assigned tasks. Despite her exceptional work ethic and the process improvements
she brought to the firm, Debbie was recently
passed over for an expected promotion to Audit
Manager. Tired and dejected after years of poor
work/life balance, Debbie decided it was in her
best interest to accept a manager position at a local firm at which a former colleague indicated
work/life balance was a priority.
Given her experience and ability to identify efficiency opportunities, the firm partners expect
great things from Debbie and foresee her fasttrack promotion to partner. Knowing their high
expectations, Debbie first attempts to identify
quick changes that could be made to firm procedures. She attempts to evaluate the potential benefits of the modifications, given the ability of firm
employees by testing them within the audit engagements she manages.
Mike Davis, Managing Partner,
Davis, Upton, Crow, and Kerry, LLP
Mike is the managing partner of the auditing
firm. Although the firm is relatively young, Mike
and the other partners hope to continue the firm’s
growth and profitability by providing high quality
tax, auditing and other accounting services to
businesses throughout the state. In addition to emphasizing hard work, Mike stresses the need for
employee work/life balance. As a result, he expects management to effectively manage audit
engagements within 10% of the planned and budgeted employee hours and expenses. These considerations figure prominently in the evaluation of
equity offerings into the partnership.
Recent news of local audit failures and questionable practices at national firms has increased
Mike’s concern over audit practices and quality.
As a result, Debbie and the partners are extremely
hesitant to reduce the scope and extent of testing
of any audits to increase efficiency. Thus, Debbie
faces limited options to increase her team’s efficiency and bring the projects she is managing
within budget tolerances.
Debbie’s Audit Team
Debbie’s audit team consists of both experienced seniors and staff members. Both groups
are aware that their performance will likely influ-
15
overpriced and that if software companies establish more reasonable pricing models they may
reduce the number of instances of software piracy.
Society
As software is continually developed and enhanced to meet the specific needs of individuals,
professions, organizations, and businesses, it provides many benefits to society. These may take
the form of efficiencies, transportability, and accuracy. As a result, software developers, vendors,
and purchasers may affect society through the development, marketing, and use of applications and
tools that can improve productivity, job satisfaction, and standard of living.
If software piracy provides benefits to unlicensed users, these do not come without costs to
society. Thus, society has developed standards,
such as professional codes of conduct and antipiracy legislation, to discourage the practice.
Some members of society believe, however,
that software should be a public good and that
programmers should be committed to encouraging
each other to evaluate, improve, and redistribute
software freely for all to benefit. Within such an
environment, the source code of programs would
need to be provided so that any user could add
bug fixes and enhanced features. Some have described this as the “hacker mentality.”
Some believe that software piracy laws are unfair and create a burden to society. One consideration of such a belief is that programmers invest
time in enhancing software and should be compensated or reimbursed for their opportunity cost.
A possible compromise is that software would not
be distributed free of charge until after the programmer had been compensated for their time and
expenses.
While other members of society are not opposed to paying a fee for the use of software, they
believe that some of the software on the market is
Instructions
The class will be divided into six groups, each
assigned to represent one of the six roles in the
case:
• Sean Robin, Developer and Programmer
of Q-Analytics
• Laura Horton, Director of Sales, Accounting Applications at Business Tools, Inc.
• Debbie Sabine, Audit Manager –Davis,
Upton, Crow, and Kerry, LLP
• Debbie’s Audit Team
• Mike Davis, Managing Partner of Davis,
Upton, Crow, and Kerry, LLP
• Society
For the role assigned to your group, please perform the following and be prepared to discuss
your deliberations and conclusions:
1. Summarize briefly the facts related to
software piracy from the perspective of
your assigned role.
2. Identify the ethical and legal issues involved.
3. Identify the potential courses of action.
4. Consider the pros and cons of the potential actions. If you consider an action to
be legal but not ethical (or vice versa),
state the basis of your reasoning.
5. Indicate and justify which course of action the group would select. (Was there a
consensus, or some disagreement?)
16