Hannah Van Dyke methodically flipped through the financial statement disclosure checklist searching for items underscored with a yellow highlighter by Jennifer Jones, the audit manager assigned to the Hampton & Worley audit engagement.1 In 30 minutes, Hannah would be meeting with Jefferson Wood, Hampton & Worley's controller to complete the checklist. Jennifer, Hannah's immediate superior on the audit team, had instructed her to pay particular attention to the dozen or so flagged items. The following day, Jennifer planned to meet with the company's chief financial officer (CFO), Kincade Pearce, to discuss items on the checklist that she believed needed additional consideration.
Hannah viewed the completion of the financial statement disclosure checklist as a perfunctory task intended to reassure the senior members of an audit team that no important accounting or financial disclosure issues had been overlooked. In her mind, such oversights were a remote possibility on the Hampton & Worley audit, given the detailed audit tests that had been applied to each major account.
Hampton & Worley manufactured a line of baby furniture that included baby cribs and beds for toddlers, changing tables, dressers, and chests, products it sold online and to high-end children's boutiques up and down the Eastern Seaboard. The private company based in Cranston, Rhode Island, a Providence suburb, had experienced impressive growth over the past decade and was planning to expand the scope of its operations by building a new production plant and distribution facility in the Midwest. The company was seeking a large loan from a lending syndicate, comprised of several insurance companies, to finance the expansion plan. Prior to finalizing the loan agreement, the syndicate had required Hampton & Worley to retain a national accounting firm to audit its most recent annual financial statements. The company had previously used the services of a regional accounting firm.
Hannah had enjoyed the Hampton & Worley audit because she had not previously been assigned to a manufacturing client. The engagement had allowed her to apply and fine-tune many of the cost accounting tools she had acquired in college.
Hampton & Worley used a hybrid costing system for its manufacturing operations that blended together elements of both job-order and process costing. Despite enjoying the engagement, Hannah wanted it to end, and quickly. The originally scheduled completion date had been March 4, the previous Tuesday. But additional audit procedures requested by the loan syndicate had extended the engagement for several days. Jennifer Jones knew that Hannah was anxiously awaiting the completion of the audit and had assured her that unless something unexpected "popped up," the engagement would almost certainly be completed no later than Friday, March 14.
One month earlier, Hannah had applied for a one-week vacation beginning March 17, which coincided with the spring break of her boyfriend, who was a third-year law student at a nearby university. Despite discouraging employees from taking vacations prior to March 31, the unofficial end of busy season, Hannah's practice office had tentatively approved her request. Hannah desperately hoped that her vacation wouldn’t be postponed because she believed that her boyfriend planned to propose to her during their romantic spring-break getaway to the small island of St. Kitts in the Caribbean.

Questions
1. Identify the key audit objectives that should be the focus of the completion or “wrap-up” phase of an independent audit. List those objectives from most to least important.
2. What quality control policies or mechanisms could audit firms employ to diminish the likelihood that individual auditors will act in their personal selfinterest rather than the interests of their employers and their profession? Do you believe the policies or mechanisms you identified would have prevented Hannah Van Dyke’s misconduct? Defend your answer.
3. Characterize Hannah Van Dyke’s decision not to inform her superiors of the product recall comments made by Jefferson Wood. Would you characterize that decision as “poor judgment,” “negligence,” or “recklessness” on her part? Defend your answer.
4. Hannah’s employer dismissed her for failing to bring the product recall comments made by Jefferson Wood to the attention of her superiors. Do you believe that punishment was appropriate? Should Carlee Chen have been disciplined for not informing Jennifer Jones or Reed Cordell—prior to the audit being completed—of the comments made to her by Hannah regarding the alleged product recall? Why or why not?