Barbara Whitley had great expectations about her future asshe sat in her graduation ceremony in May 2012. She was about to receive her Masterof Accountancy degree, and next week she would begin her career on the audit staff ofGreen, Thresher & Co., CPAs.Things looked a little different to Barbara in February 2013. She was working on theaudit of Delancey Fabrics, a textile manufacturer with a calendar year-end. The pressurewas enormous. Everyone on the audit team was putting in 70-hour weeks, and it stilllooked as if the audit wouldn’t be done on time. Barbara was doing work in the propertyarea, vouching additions for the year. The audit program indicated that a sample of allitems over $20,000 should be selected, plus a judgmental sample of smaller items. WhenBarbara went to take the sample, Jack Bean, the senior, had left the client’s office andcouldn’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 basisfor doing this was that there were about 250 such items, so 50 was a reasonably goodproportion of such additions.Barbara audited the additions with the following results: The items over $20,000contained no misstatements; however, the 50 small items contained a large number ofmisstatements. In fact, when Barbara projected them to all such additions, the amountseemed quite significant.A couple of days later, Jack Bean returned to the client’s office. Barbara brought her workto 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 itemsover $20,000 plus 5 or 10 little ones. You’ve wasted a whole day on that work, andwe can’t afford to spend any more time on it. I want you to throw away the scheduleswhere you tested the last 40 small items and forget you ever did them.”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 notmaterial anyway. 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 the book to resolve the ethical dilemma.
Barbara Whitley had great expectations about her future as
she sat in her graduation ceremony in May 2012. She was about to receive her Master
of Accountancy 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 2013. 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 property
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
proportion 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.”
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 anyway. 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 the book to resolve the ethical dilemma.
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