'T'f1 (e Y 4 COMPREHENSIVE CASES SECTION ONE Questions 1. Define the terms ethics and professional ethics. Using the follc wing scale, evaluate the conduct of each individual involved in this case. U007, o wieatonaine ainntume 0isd o i m i wigre et D00 Highly Highly Unethical Ethical 2. Do you believe that the individuals who behaved unethical appropriately punished? Defend your answer. in this case were 3. Identify the alternative courses of action available to Martirossian when he became aware of the accounting fraud at AMRE. Assume the role of Martirossian. Which of these alternatives would you have chosen? Why? 4. Was AMRE practice of deferring a portion of its advertising costs in an asset account appropriate? Defend your answer. 5. What key red flags, or audit risk factors, were present during the 1988 and 1989 AMRE audits? Did Price Waterhouse appropriately consider these factors in planning those audits? Why or why not? 6. Was Price Waterhouse justified during the 1988 audit in agreeing to allow client personnel to observe the physical counts at certain inventory sites? To what extent should an audit client be allowed to influence key audit planning decisions? b No. 31,"Evidential Matteridentifies five management assertions that underlie a set of financial statements. Which of these assertions should have been of most concern to Price Waterhouse regarding the large period-ending adjustments AMRE recorded during the fourth quarter of fiscal 19897 8. What responsibility do auditors have for quarterly financial information reported in the footnotes to a client's audited financial statements