1. Introduction & Problem Identification: A newly created accounting/auditing firm (owned by George and Sheila, the partners) is preparing a bid proposal for a potential new client, from the construction industry. The staff member drafting the proposal (Gary) produces a bid a little too pricy, according to the manager in charge (Joyce), so she asks him to cut down the costs by gathering accounting students for the field work, but Gary is concerned that said approach may be risky for a new client.
Furthermore, pursuant to recently updated CPA guidelines for audit firms, auditors are required to be extra alert for cash flow problems for construction industry clients, hence no corners should be cut with this potential client. Joyce asks Gary to follow her suggestions though, promising she would handle any eventualities with either the client of the partners, further offering Gary a managerial position down the road if he follows along.
The problem, therefore, is whether to prioritize income generation for the new audit firm, regardless of quality and even ethics potentially being compromised, or to prioritize the well being of the client, and as a consequence, getting a boost to the reputation and reliability of the firm in the long run.
2. Decision Criteria: Based on the facts of the case, the decision criteria should be based on factors such as budget constraints (weight is 2 out of 5), guidelines compliance (weight is 5 out of 5), firm reputation (weight 4 out of 5), and long-lasting reliability (weight is 3 out of 5).
3. Generate Alternatives:
(i) To lower the bid price by hiring accounting students for the audit engagement;
(ii) To hire a mix of two accounting students and two experienced senior auditors, hence lowering the bid somewhat, yet offering the appropriate seniority to deliver pursuant to guidelines;
(iii) To withdraw the bid and inform the construction industry client that the firm is not quite ready to take on their account with the current constraints, but offering to be ready next year, hence protecting its reputation;
4. Evaluate Alternatives: If one of our solutions produces both a duly audit guidelines-compliant work and a middle-ranged bid price that leave both the audit firm and the client satisfied, then such shall be the chosen alternative.
5.Select the Best Alternative: Based on the evaluation carried out, the best alternative is the second one, which entails hiring a mix of two accounting students and two experienced senior auditors, in such a way that the proposed bid becomes more pricewise attractive, yet compliant enough to make sure all auditing guidelines are duly enforced and the well-being of the client is appropriately ensured, yielding a satisfied account, which as a consequence enhances the firm's reputation and reliability.
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ResponderEliminarIn your decision-making process, you have effectively implemented the rational decision-making process by first identifying the problem and then generating alternatives based on the given scenario.
The weighting of the criteria seems reasonable as well. You have considered the requirement of complying with audit guidelines, which is crucial for the firm's credibility and reputation. The alternative you have selected, hiring a mix of two accounting students and two experienced senior auditors, is a creative solution that balances the bid price and compliance with audit guidelines. This approach addresses the manager's request to cut down costs while ensuring the quality and reliability of the audit engagement.
The evaluation of the alternatives could have provided a more critical analysis of the risks and drawbacks associated with each option. It is important to consider both the potential benefits and limitations of the alternatives to make a well-informed decision. One area that could be further explored is the consideration of potential risks associated with hiring accounting students. It would be beneficial to address any potential concerns or challenges that may arise from relying partially on students for the fieldwork. This would strengthen the justification for your decision and provide a more comprehensive analysis. Overall, your decision-making process is logical, and your chosen alternative reflects a thoughtful consideration of the criteria and context. Your solution demonstrates a good balance between cost-effectiveness and maintaining the firm's professional standards, which will contribute to its long-term success.