Reference no: EM132463410

Question problem 1: Lynn Hanna, a member, is a manager on the accounting staff of Duffy Construction, Inc. Hay & Ho, CPAs is performing an audit of the Duffy Construction, Inc. financial statements for the year ended June 30, 20X2 and is in the final stages of the audit.

• As part of their audit procedures, Mike Simmonds, the audit manager in charge of the Duffy Construction, Inc. audit, is gathering various representations, both written and oral, from various senior accounting personnel at Duffy Construction, Inc. Lynn Hanna works under the supervision of Dana Johnson, the controller of Duffy Construction, Inc. Jordan Walden is the CFO of Duffy Construction, Inc. and oversees all aspects of the accounting function for the company.Lynn Hanna is aware of a number of accounting irregularities that could result in a material misstatement of the Duffy Construction, Inc. financial statements. However, the actions that led to these irregularities, while actually performed by Lynn, were performed because Dana Johnson, the controller of the company, asked Lynn to do it based on orders received from Jordan Walden, the CFO of the company. Lynn was told by Dana Johnson that if she disclosed these irregularities to anybody she would be immediately terminated from her position with the company.Mike Simmonds has asked Lynn Hanna if she is aware of any items that have not been disclosed to the auditors that would have a material effect on the financial statements of Duffy Construction, Inc. With regard to this inquiry from Mike Simmonds,

which of the following statements is correct?

A) Lynn Hanna cannot disclose the information regarding the accounting irregularities because it would violate the rules regarding confidential company information.
B) Lynn Hanna should not disclose the information regarding the accounting irregularities because she was told that such disclosure would result in her termination from her position with the company.
C) Lynn Hanna is required to disclose the information regarding the accounting irregularities to Mike Simmonds.
D) Lynn Hanna is not required to disclose the information regarding the accounting irregularities because she should assume that they will be disclosed by either Dana Johnson, the controller, or Jordan Walden, the CFO.