Reference no: EM13490314

Question

Jimmy Ford, a senior audit manager for Fitzgerald & Milhouse Chartered Accountants, has recently been informed that the firm has plans to  promote him to partner within the next year or two so long as he continues to perform at the same high level of performance as he has  achieved in the past. Jimmy is particularly good at dealing effectively with people, including the staff of clients, professional staff, partners and potential clients. He has recently built a bigger home for himself which he uses to entertain people, and he has been granted memberships of his local community's most prestigious country clubs. Jimmy is very confident about his future with Fitzgerald & Milhouse.

Jimmy has recently been assigned to the audit of Engines International Ltd, a large wholesale company that ships goods throughout the world. It is one of Fitzgerald & Milhouse's most prestigious clients representing a substantial proportion of audit revenues. During the audit,  Jimmy determines that Engine International uses a method of revenue recognition called ‘bill and hold', which involves billing customers for goods that are not shipped until a considerable time later. This method has recently been questioned by the Australian Securities and Investment Commission. After considerable research, Jimmy concludes that the method of revenue recognition is not appropriate for Engine
International. When Jimmy discusses the matter with the senior audit partner, she concludes that the accounting method has been used for more than ten years by the company and is appropriate. The partner is certain the firm will lose the client if the revenue recognition method is found inappropriate by the auditors. Jimmy argues that, although the revenue recognition method was appropriate in previous years, the ASIC comments suggest it is inappropriate in the current year. Jimmy recognises the partner's responsibility to make the final decision, but he feels strongly enough to state that he plans to include a statement in the working papers that he disagrees with the partner's decision. The partner informs Jimmy that she is unwilling to permit such a statement because of the potential legal implications. She is willing, however, to write a letter to Jimmy stating that she takes full responsibility for making the final decision if a legal dispute arises. She concludes by saying, "Jimmy, partners must act like partners, not like loose cannons trying to make like difficult for the other partners. You have some growing up to do before I would feel comfortable with you as a partner".

Required:

What should Jimmy do? Decide your response using the AAA ethical decision model.