Avis Love, Stuff Accounting

Case 1 (6.5 Avis Love, Stuff Accounting)

1. It would have been not appropriate.

Firstly, if Avis would had removed Store 51 from the Sample, the error rate would had been 10% instead of 15%. In such situation, the CEO might not want to test all the stores, which can create huge risks for the company.

Secondly, if someone in Store 51 would had reported that Avis did test this store, Avis would have faced a suit.

Thirdly, while auditors are facing ethical dilemmas, they should forget their emotional concerts and disclose all the errors.

2. The parties include the accounting firm that Avis works for, and Lowell Inc. that Avis audits.

I will talk about the obligations by following points.

Avis should exercise sensitive professional and moral judgments in all the activities

Avis should serve the public interest, honor the public trust, and demonstrate commitment to professionalism.

Avis should perform all professional responsibilities with the highest sense of integrity.

Avis should be independent in fact and appearance when providing auditing.

Avis should observe the profession’s technical and ethical standards, strive continually to improve competence and quality of services, and discharge professional responsibility to the best of the member’s ability.

Avis should observe the principles of the Code of Professional Conduct in determining the scope and nature of services to be provided. (Arens, Elder, & Beasley, 2012)

3.The AICPA’s Code of Professional Conduct does not prohibit auditors from developing friendships with client personnel. (AICPA, 2016)

I think the company can do a “second auditing”. By setting segregation of duties in the auditing team, someone in this team can supervise Avis’ s works.

4. The key objective is cutoff. Auditors should make sure sales are recorded in correct period.

5.  In this case, the cutoff error is created by fraud. Fraud behavior must be material.

When errors are not created by fraud, Avis should consider following factors: (Loughran, 2016)

• The comparative size of the misstatement.
• The nature of the misstatement
• The relationship to other misstatements
• The inherent character of the mistake

Referrance

AICPA. (2016). Developing a Personal Relationship With a Client: It’s All About Trust. Retrieved from AICPA: https://www.aicpa.org/interestareas/youngcpanetwork/resources/leadership/pages/developingrelationshipswithclients.aspx