Reference no: EM13833429

Assessment

Task

Question 1-

Read the following case and answer the question below:

Case:

Jenny Tenterfield spent the 30th June performing inventory observation procedures. This included taking test measurements at a client's grain storage tower in a small regional town. Jenny had measured grain inventories on two previous audits and was the in-charge accountant on this audit.

Jenny's observations of the quantity of the grain fell 10% below the client's records. Jenny's attention was drawn to the discrepancy between the two measurements of what was in the tower because, in her judgment, such a gap was significant enough to be material. The resulting difference between the inventory as reported by the client and the audited amount was enough to cause a significant drop in net income. Jenny documented her findings in the working papers and proposed an adjusting entry for the difference.

After further investigation Jenny found that a discrepancy in the grain inventory had occurred two months previously. The quantity of the grain inventory as reported by a government inspector at the time was also lower than that on the client's records. The difference on the inventory valuation, however was not as great as that in Jenny's test. No adjustment to the client's records had been made at that time. This information was included in the working papers.

Before discussing the discrepancy with the client, Jenny told Greg, the engagement partner, about the problem. Greg, who had substantial experience in the industry, advised Jenny that this would be a sensitive issue with the client. He also pointed out that the grain inventories are notoriously difficult to measure, with the potential errors as large as 10%. Greg promised that he would handle the matter personally and therefore told Jenny not to discuss the matter with the client. The partner kept the inventory working papers.

After completion of the field work, Jenny returned to the office to wrap up her work on the engagement. The inventory working papers were still not in the file. Upon Jenny's enquiry the partner handed her a new set of working papers. These working papers which had been dated as at the audit date had been signed off by Greg and substantiated the book amount. Jenny's subsequent questioning of the partner revealed that Greg had personally performed additional work on the grain inventory after the client's year-end. Based on his own evidence gathering the partner had substituted his own working papers for the documentation that Jenny had prepared. No evidence remained of Jenny's proposed adjustments. An unmodified opinion was subsequently issued.

Required

What should Jenny do? Use the Accounting and Professional Ethical Standards and one of the ethical decision models presented in your text to help you answer the question.

An example is provided below using the American Accounting Association (AAA) Model. You can use any of the models from the textbook; you do not have to use the AAA model.

American Accounting Association Model Decision making process

1. Determine the facts The facts are: ....

2. Define the ethical issues The ethical issues are...

The stakeholders are...

Question 2-

Task

Prepare a report for your fellow students that:

a) Describes the development of the internationalisation of auditing.

b) Evaluates the need for the internationalisation of auditing.

c) Identifies barriers to the internationalisation of auditing.