The Shareholders and Investors of Prairieland Bank

Case No.1

a.

Stakeholders are parties that have interest in the organization. This interest may cover formal or informal relationships which they receive compensation from a contract or simply affected by the organization’s business. The potential stakeholders of Prairieland Bank includes shareholders, investors, employees, customers, auditors, public and environmentalists.

Firstly, the shareholders and investors of Prairieland Bank are one of the potential stakeholders. The shareholders would be interest in the institution’s financial statements, solvency and measures, such as earnings per share, intangible and tangible assets and dividend yield. Shareholders would make their decisions based on the financial statement. If the institution decided to not increase their provisions, in the near future, it would cause harms to the company. At last, shareholders would suffer from their decisions based on the unfairness of the financial statement.  Incorrect information may led the shareholders to suffer lost in monetary value and emotional stress.

Next, the potential stakeholders of Prairieland Bank include employees. Employees of Prairieland Bank might suffer the most by the decision of the institution’s managers and executives. Employees are mostly concerned on the institution’s solvency and profitability. This is because when the institution made profits, employees would receive increment in salaries, bonuses and other benefits.

Customers or clients are one of Prairieland Bank stakeholders. They would rely on credible disclosures from financial institutions.

b.

Based on this case, James London auditing firm should resign from Prairieland Bank. This consider as the right decision as the auditor believed that they could not issue a true and fair view on the company. Even though the engagement partner handled the issue of insufficient loss provisions correctly by addressing it to the management, the management were unwilling to remedy the situation because the reported profits would decrease. Hence, it would be best for the auditor to address the issue to more senior partners in his firm who were positioned and responsible to make the resignation decision.

c.

James London should not say anything afterwards. He should not ask anything more to maintain his reputation as an auditor. As an auditor, they should not disclose any private and confidential information of their clients, even their past clients.  

• If James and Ben decide to resign, the benefit is given to Prairieland Bank because they will maintain their good reputation and well perform. But, if this is happen the other stakeholders and retained customer will affected. If I were James London/Ben Hunt, I would have supported the resignation. This is because when Ben Hunt expressed his concern over the banking practices of the client, the representatives of the bank were adamant. Provided Hunt and London explained the risks thoroughly but the bank still refused to budge, then there is no other option for Hunt and London but to resign.

Case No.2

a.

The stakeholder list should includes other auditors who are to be questioned, current and fitire shareholder, directors (particularly the one who is in Audit Committee) and the auditing profession. In addition, however there is the issue of the proper conduct of Bill Page as the professional in charge of the audit, and the auditors who are going to be consulted in the circumstances wither as a way of putting pressure on Bill, or as a preamble to opinion shopping to see who might get the audit in the future. What ethical considerations ought they to consider.

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