Ethics Case Suppose an auditor has been paid $1,000,000 each year for the past several years to perform the audit of a company's annual financial statements. This company is the auditor's largest client. In the current year, the auditor notices that the preliminary income statement excludes certain expenses that typically are shown. When asked, management tells the auditor that these expenses do not reflect the company's true performance, so they will not be shown in this year's income statement. Plus, management informs the auditor it will be paying $1,200,000 for this year's audit, and management commits to using the auditor for at least five more years. Required: 1. Understand the reporting effect: Does the audit arrangement described above have the potential to jeopardize the auditor's opinion of management's decision not to report certain expenses? 2. Specify the options: Are auditors employees of the company who must accept requests of management? 3. Identify the impact: Do investors, creditors, and others rely on the fair presentation of financial statements? 4. Make a decision: Should the auditor accept management's decision not to report the expenses this year? Explain your arguments. ANSWER IN DETAILED EVERY QUESTION Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Ethics Case
Suppose an auditor has been paid $1,000,000 each year for the past several years to perform the audit of a company's annual financial statements. This company is the auditor's largest client. In the current year, the auditor notices that the preliminary income statement excludes certain expenses that typically are shown. When asked, management tells the auditor that these expenses do not reflect the company's true performance, so they will not be shown in this year's income statement. Plus, management informs the auditor it will be paying $1,200,000 for this year's audit, and management commits to using the auditor for at least five more years.
Required:
1. Understand the reporting effect: Does the audit arrangement described above have the potential to jeopardize the auditor's opinion of management's decision not to report certain expenses?
2. Specify the options: Are auditors employees of the company who must accept requests of management?
3. Identify the impact: Do investors, creditors, and others rely on the fair presentation of financial statements?
4. Make a decision: Should the auditor accept management's decision not to report the expenses this year? Explain your arguments. ANSWER IN DETAILED EVERY QUESTION
Note:-
- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
- Answer completely.
- You will get up vote for sure.
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