Linda is the managing partner of Moss and Associates, a small audit firm. Linda’s role includes managing the business affairs of the firm, and she is very worried about the amount of fees outstanding from audit clients. One client, Dreamers Pty Ltd, has not paid its audit fees for two years despite numerous discussions between Linda, the audit partner, Bill, and the management of Dreamers Pty Ltd. Dreamers Pty Ltd’s management promised the fees would be paid before the audit report for this year was issued. 76 Auditing: A Practical Approach Linda rang Bill this morning to ensure that the audit report was not issued because Dreamers Pty Ltd had paid only 10 per cent of the outstanding account. She discovers that Bill is about to sign the audit report.

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Explain the ethical problem in this case. Why is it a problem? What can be done about it?