Question: Mr Arty works for Smile Accounting Firm as a senior
Mr. Arty works for Smile Accounting Firm as a senior accountant. Currently he is doing a review of rental property compliance testing completed by the staff accountants. He is testing rental receipts and expenses of the property owned by the client. Arty realizes that the staff accountants tested only two tenants per property instead of the required three by the audit program based on materiality considerations. However, to request more information from the client would cause massive delays and the manager on the engagement is pressing hard for the information before Christmas vacation. Assume the manager approaches the client, who states that she does not want any additional testing: “I needed the report yesterday.” The manager points out to Arty that no problems were found from the testing of the two properties. Moreover, the firm has never had any accounting issues with respect to the client. Assume the firm decides it is not necessary to do the additional testing. What would you do if you were Arty? Consider in your answer the ethics of the situation and reporting obligations of the firm.
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