Denise Norris is a manager at Fitch & Jones, LLP, a regional audit firm in Providence, Rhode
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Question:
Denise Norris is a manager at Fitch & Jones, LLP, a regional audit firm in Providence, Rhode Island. Norris is preparing for a meeting with Alan Morse, the controller of Rhody Electronics, a publicly held company in Providence. The meeting concerns a variety of questions raised by the controller about the audit as follows.
- Why wasn’t $1 million revenue recorded in 2016 for a December 31, 2016, transaction whereby Rhody agreed to sell $1 million of software to Ocean State Electronics in return for a stock issuance of that company? Ocean State, in return, agreed to sell $1 million of similar software to Rhody on January 5, 2017, in return for a stock issuance from Rhody.
- Why does the firm need to do additional testing of the collectability of receivables beyond that included in the original audit plan?
- Why has the firm hired a consultant to help with the audit of the company’s information systems
Norris has decided to use the occasion to raise a few issues with Morse as follows:
- Documents are not being provided in full or on a timely basis, thereby requiring extra time and effort to complete the audit.
- Inquiries are being ignored; answers are often unhelpful; and some staff in the accounting department seem to resent those questions.
- Why did Morse request a staff member be removed from the audit team citing irreconcilable “personality” differences?
Question:
What role should the client have in raising issues related to auditors’ planning and execution of the engagement? Support your answer using ethical reasoning.
Related Book For
Essentials of Business Statistics Communicating With Numbers
ISBN: 978-0078020544
1st edition
Authors: Sanjiv Jaggia, Alison Kelly
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