You will be assigned one case problem that will require you: a) to demonstrate ethical considerations involved in the accounting profession; b) reading and analyzing an ethical dilemma; c) writing a paper on the results of your analysis; and d) engaging in a classroom discussion about your analysis and approach to resolve the ethical dilemma.
The case study is
4-29 (Objectives 4-2, 4-7) Barbara Whitley had great expectations about her future as she sat in her graduation ceremony in May 2015. She was about to receive her Master of Accounting degree, and next week she would begin her career on the audit staff of Green, Thresher & Co., CPAs.
Things looked a little different to Barbara in February 2016. She was working on the audit of Delancey Fabrics, a textile manufacturer with a calendar year-end. The pressure was enormous. Everyone on the audit team was putting in 70-hour weeks, and it still looked as if the audit wouldn’t be done on time. Barbara was doing work in the prop- erty area, vouching additions for the year. The audit program indicated that a sample of all items over $20,000 should be selected, plus a judgmental sample of smaller items. When Barbara went to take the sample, Jack Bean, the senior, had left the client’s office and couldn’t answer her questions about the appropriate size of the judgmental sample. Barbara forged ahead with her own judgment and selected 50 smaller items. Her basis for doing this was that there were about 250 such items, so 50 was a reasonably good propor- tion of such additions.
Barbara audited the additions with the following results: The items over $20,000 contained no misstatements; however, the 50 small items contained a large number of misstatements. In fact, when Barbara projected them to all such additions, the amount seemed quite significant.
A couple of days later, Jack Bean returned to the client’s office. Barbara brought her work to Jack in order to apprise him of the problems she found and got the following response:
“Gosh, Barbara, why did you do this? You were only supposed to look at the items over $20,000 plus 5 or 10 little ones. You’ve wasted a whole day on that work, and we can’t afford to spend any more time on it. I want you to throw away the schedules where you tested the last 40 small items and forget you ever did them.”
Part 1 / THE AUDITING PROFESSION
When Barbara asked about the possible audit adjustment regarding the small items, none of which arose from the first 10 items, Jack responded, “Don’t worry, it’s not material any- way. You just forget it; it’s my concern, not yours.”
a. In what way is this an ethical dilemma for Barbara?
b. Use the six-step approach discussed in this chapter to resolve the ethical dilemma.
The text book we are using is Auditing and assurance services 16th edition by Alvin ares , Randal j elder, mark s Beasley and if need be send me a message and I will gladly attach the textbook
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