Question

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ACCT 4304 - Ethics Exercise for the ethical dilemma thal Juan is facing usia that Juan is facing using the step by step Read the case below and solve the s work on an audit, he finds an instance of what Juan is a staff assistant for a CPA 6. he believes might be fraud committed department. Further, Juan believes the financial statements. He shows the inform thanks him for showing him the informat issue. Juan later learns that Derek only spoke with discussion of the issue in the work par they need to keep this issue quiet so that it CPA firm. During his work on an audit, he finds an mitted by Brett, the supervisor of the client's accounting sues that the fraud has caused a material misstatement in the information to Derek, the in-charge on the audit. Derek information and tells Juan that he will finish the work on the moke with Brett about this and did not include any overhears Derek and Brett discussing how e in the work papers. Further, he overhears Derek and B. so that it does not become a problem for both of them. Juan he situation and Derek states that it is not a problem and it is just Juan's lack of experience that has led him to think it his colleagues that junior staff members usually do auditor and that new employees who are not "team players" don't last later tells Derek that he is concerned about the situation and because it is immaterial and it is just Juan's actually is a problem. Derek has heard from his colleagues that iunie not question the in-charge auditor and that new e long at this firm. 1. What are the relevant facts? 2. What was the Ethical issue? 3. Who is affected and how? 4. What are Juan's available alternatives? 5. What are the Consequences of each alternative? 6. What is the appropriate action for Juan to take?

Answer 1

1. In the given scenario, a staff assistant has found a fraud in the financial statements during audit which has led to material misstatement in the books of accounts. The same have been informed by the assistant to the in-charge of audit, including the name of the person involved. Later, it was noticed that the problem was only discussed orally with the concerned person, and no written documentation was involved. The staff assistant also didn't get a valid response on consulting regarding this matter with the in-charge.

2. The ethical issue faced by the staff assistant is whether he should exercise her professional responsibilities and take an appropriate action on her behalf as she believes that a fraud involving material misstatement has been committed, or whether she should ignore the issue being told by her senior to let the matter go, and not question the in-charge again on the same issue, and being a 'team player' in order to last longer in the firm.

3. The fraud being committed in the financial statements can affect the stakeholders (being the shareholders, customers, creditors) of the company in an adverse way. It will also lead to a civil/criminal liability against the parties involved in the fraud and the auditor of the company.

4. Juan should consider her professional responsibilities, she should report such matter to the management or those charged with governance. She should also consider whether the same creates a legal obligation to disclosure as well, and if yes, she should seek legal support. It should be kept in mind that being a auditor, one is expected to practice due diligence and practice utmost care while discharging their duties.