Ethics Case Study you have selected case study 1 do not let your friends suffer please follow through the story closely you are john a newly promoted audit partner in mid- sized audit firm it's an open secret that katherine the managing partner has earmarked you to be her successor when she retires hi John mr. dan the chairman of KS private limited has arrived he is now in the meeting room thanks joey i will be there in a short while moments later in the meeting room hi before i start this meeting i would like to thank you for making your way down for this urgent meeting that i called for no problem may i know what this is about as you would recall i had previously agreed with your assertion that the one point five million dollars owed by express limited was collectible however due to current developments it's impractical we had discussed this previously and you had agreed that it was collectible is it arising from express limited liquidation i am afraid so as it was widely reported that express limited is facing financial difficulties and has been recently put on compulsory liquidation it is no longer likely that the one point five million dollars owed by express Limited will still be collectible and allowance for doubtful debt will need to be made in the worst-case scenario the entire debt will need to be written off that will also cause my company's account to be adjusted downwards which will lead to us breaching certain debt equity ratio imposed by the bank this would cause a liquidity issue in the worst case scenario we may even need to shut K s private Limited down jobs are going to be lost John are you sure this is an issue in the first place i had called the liquidator of express limited and he had assured of express limited and he had assured me that the debt will be repaid in due course i can even issue you a formal letter to confirm my understanding Mr Tan based on my understanding i am not sure if the full amount would be collected and allowance would still be required so regardless an allowance For doubtful debt would still have to be made John you had been auditing us since you joined your firm after graduation you have become a good friend to us i has even asked Catherine to let you take over from her to be our auditor now that she is retiring soon would you like to see your friends suffer now let's review and understand the learning points from this case study first there could be a self-interest threat as KS limited was a major client of John's audit firm and second there could also be a familiarity threat since John had audited KS limited for a very long time and mr.tan had regarded John as a friend in spite of the threats John exercised professional skepticism he did not accept mr. tan claims that most of KS private limited stats from Express limited were collectable at face value so what should John do next as a follow-up John should contact the liquidator of Express limited to have a better idea of how much could be recovered he should also propose the necessary adjustments to KS private limited financial statements if the liquidator reverts that Express limited is unable to repay KS private limited. Question: What are the ethical principles in breach of the necessary adjustments are not done