Reference no: EM133096729

Question - Late one Thursday afternoon, Jasmine Matthews, a veteran audit manager with a regional CPA firm, was reviewing documents for a long-time client of the firm, DMT Shipping. The year-end audit was scheduled to begin Monday.

For three months, the economy had been in a down cycle and the transportation industry was particularly hard hit. As a result, Jasmine expected DMT's financial results would not be pleasant news to shareholders. However, what Jane saw in the preliminary statements made her sigh aloud. Results were much worse than she feared.

"Lou (the company president) already is in the doghouse with shareholders," Jasmine thought to herself. "When they see these numbers, they'll hang him out to dry."

"I wonder if he's considered some strategic accounting changes," she thought, after reflecting on the situation. "The bad news could be softened quite a bit by changing inventory methods from LIFO to FIFO or reconsidering some of the estimates used in other areas."

Required -

1. How would the actions contemplated contribute toward "softening" the bad news?

2. Do you perceive an ethical dilemma?  If you do, describe the dilemma.  If not, why not?

3. What position, department, or outside parties would be affected by following up on Jasmine's thoughts?