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Waverly Holland, Audit Senior

Essay by   •  December 11, 2018  •  Essay  •  1,057 Words (5 Pages)  •  645 Views

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Case Summary – Waverly Holland, Audit Senior

Waverly Holland, or “Dutch,” grew up in Arizona but always loved the mountains and skiing. While he was in high school, he decided on a career path to become a ski resort manager. After many interviews with various managers at ski resorts, he determined that majoring in accounting would be the most valuable degree in accomplishing his goals. He also appeared to be well-suited for accounting based on occupational tests. Ultimately, he planned to work in the accounting profession for a few years, and then return to school for an MBA in resort or hotel management.

After graduating, Dutch joined a major accounting firm as an auditor, in hopes of being exposed to real world issues and internal controls that he hoped would help him in his future as a business manager. Dutch then went on to begin his MBA program as planned. In his first semester, he was accepted for a management internship program at a large ski resort and expected that he would be offered a position that would be available after graduation. All things were going well for Dutch, perfectly according to plan, until it all suddenly became more complex…

Dutch received a call one day that a previous client of the accounting firm he worked for, Padova & Vicenza, was the defendant in a class-action lawsuit for materially misrepresenting its financial condition and operating results over the past 3 years. Dutch had worked on the Padova & Vicenza audit, and in the final year that he worked the audit, he was the principal audit senior. He knew that the audit workpapers would be under heavy scrutiny during this lawsuit.

Dutch had enjoyed his time as an auditor, always being exposed to new systems, accounting techniques, industries and technical issues. He always enjoyed the challenges that were given to him. He enjoyed it so much that he almost decided to stay in public accounting instead of pursuing his dream. The main downside he saw in public accounting was the possibility of overlooking material errors in client’s financials. Padova & Vicenza was one of the audits that Dutch recalled having lingering concerns over the accurateness of their financial statements. P&V faced significant pressures from foreign competitors who were able to operate at a much lower cost (P&V was unionized at their production facilities).

Under financial stress, the company had made a number of aggressive accounting and operating decisions to cut costs in an attempt to improve profitability and maintain terms of debt covenants. As Dutch completed the call with Chope, the attorney on the case, he began to feel sick because he thought it was likely that he would have signed off on workpapers that might have contained the misstated accounts. Chope explained that there were some issues they wanted to clear up in regard to the audit, and they felt that Dutch would be the best person to discuss those issues with given his knowledge. Dutch was not too fond of being chosen for this role and felt that he had acted appropriately during the audit of P&V. Chope promised Dutch that he would not be named in the lawsuit against P&V if he agreed to meet with him. Dutch felt worried and pressured, but finally agreed to meet.

Before the meeting, he decided to call Clayton Morris, an audit partner with his former employer. After a heated conversation with Morris, who was urging Dutch to not meet with Chope and was assuring him that he would not be included as a defendant and that if he did decide to testify for the plaintiff that the accounting firm would go after him personally, Dutch is faced with the difficult decision of either calling off the meeting with Chope or moving forward with it.

  1. How do you believe that Dutch Holland resolved the dilemma that he faced? Do you believe that he met with Robert Chope? Why or why not? Place yourself in Dutch’s position. What would you have done? Explain.

I believe that Dutch would have ultimately met with Robert Chope. If anything, he had his firm’s position regarding the case and what they wanted him to do, but he still didn’t have very many details from Chope. I think it would behoove Dutch to at least discuss the case with Chope, but not necessarily details at the first meeting. Depending on the outcome of the meeting, it would probably be appropriate for Dutch to at least seek legal consultation and advice about the case and his position.

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