Reference no: EM133197962
Peter Wong was offered a job as an audit associate in CK Chong & Co, a medium size public accounting firm. On the first day of reporting to work, Peter was given 2 hours of orientation and 4 hours of training, thereafter he was left alone to go through some audit files. Next day he was asked by his senior to do some filing works. On the third day of work, he was assigned to field audit of a new client. The new client, TF Value Bhd (TF Value) a listed entity in Bursa Securities, manufactures semiconductors for both local and overseas markets. The financial year end for TF Value is 30 April 2021.T he pressure on this audit was enormous as client required the audited financial statements to be ready by end of June 2021 to support the application for bank loan. Despite everyone in the audit team working 80 hours per week including overtime for whole month of May 2021, the audit is unlikely to be completed in time to meet the client's deadline.
Peter was assigned to handle the audit on the cash and bank account. He mainly focussed on vouching forthe additions for the year. The audit program stated that a sample of all items over RM 30,000 should be chosen, plus a haphazard method of sampling for smaller value items. When Peter went to pick up the sample, CM Tan, the audit senior, had left the client's office. CM Tan has off his mobile phone; there was no way to be reached to clarify Peter's concern about the appropriate size of the sample to be chosen for smaller value items.
Based on his own judgment, Peter has chosen 80 smaller value items. His basis for doing this was that there were about 500 items, so 80 was a reasonably good proportion of the population.
Peter on his own liberty took some of the client's files home and asked his brother, who is currently pursuing the final stage of ACCA qualification to assist him in a certain part of the audit work.
Peter audited the additions with the help of his brother, the following are the results:
The items over RM 30,000 contained no misstatements; however, about 70 of the 80 small value items contained a large number of misstatements. Subsequently, when Peter calculated the projected misstatements in the findings, the value seemed to be very significant.
A couple of days later, CM Tan visited the client's office to discuss some audit issues with the management, Peter took the opportunity to submit the audit file for CM Tan to review.
The following was CM Tan response:
Oh my God, Peter why did you do this? You were only supposed to look at the items over RM 30,000 with an additional 6 to 9 samples of the smaller value items. You have wasted a whole day of work, auditing on so many samples which are deemed unnecessary. We could not afford to spend more time in this area as the audit time cost has exceeded our budget for this audit. I want you to discard or throw away all the working papers where you have tested the last 80 small value items. Forget you ever did them otherwise you and I will be reprimanded by our manager!
When Peter inquired about the possible audit adjustment pertaining to the significant finding that arose from the 70 items, CM Tan responded, "Just forget about it, you need not worry so much since based on my professional judgment, it is not material. Anyway, it is my concern, not yours! Do not forget, you are still under probation, I am the one who will evaluate your performance"
Adopt the American Accounting Association (AAA) ethical framework to resolve the ethical dilemma that Peter could be in. Explain identification of the norms, principles, and values related to the case. What is the best course of action that is consistent with the norms, principles, and values?