Case 6.2: Bill DeBurger, In-Charge Accountant

Case 6.2: Bill DeBurger, In-Charge Accountant

Question 1

In the line of conducting their duties, auditors are allowed to present an adverse opinion or a disclaimer in case they come across any information that necessitates these aspects. In this case, Bill has the option of completing the memo while including the opinion that his boss expects from him. While expressing such an opinion, Bill has the option of including an explanatory paragraph, in which he outlines that $72,000 net overstatement may not be accurate, however, it comes out as being logical to view the overstatement as being immaterial. However, this does not seem necessary. Bill is not sure whether the overstatement is accurate or wrong. He should just present the memo in the form that Sam expects it to be. Given the time that had been spent on the inventory audit, if there were errors or fraud, they could have been detected by this point.

In case I was faced with such a dilemma, I would seek the opinion of other auditors. If they find supporting evidence that shows the amount is wrong, I would issue an adverse opinion. If not, I would feel peaceful while stating that all the material aspects are fairly presented in accordance with the relevant principles.

Question 2

Yes, I would have used a different approach. This would have been in terms of timing and provision of explanation to Sam. I would not have waited until the final minute to raise the issue. Since Bill waited until the last minute, Sam did not see it as being feasible to apply the relevant steps and tests for Bill to confirm the uncertainty. Bill also came out with the refusal to sign off the report without giving Sam a sufficient explanation. It would have been inopportune for Sam to side with him in such a situation.

Question 3

The response that Sam gave Bill came out as being unprofessional and inappropriate given the situation. To begin with, Sam did not take an interest in trying to understand why Bill was not ready to sign off on the inventory account as he was tasked with this responsibility. Sam ought to have shown more concern on this issue since Bill’s remarks would not have come just from nowhere. Instead of analyzing the situation, Sam appeared to pressure Bill in presenting the memo in the way that he liked it. Sam is a partner in the audit engagement, and he would be liable in case there was a misrepresentation in the audit report. For this reason, he needed to ascertain that everything was in order.

Question 4

It is inappropriate for inexperienced auditors to be tasked with the primary responsibility of critical accounts as it was in the case of Marcelle Stores’ inventory. This is because auditing depends on the auditor’s judgment on most of the issues that are not quite straight forward. Given the inexperience involved, the auditors would find it difficult to make the appropriate judgment calls. This is why inexperience among the young audit staff is regarded as a primary cause for audit failure.

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