Vaughan has been in an audit engagement for about 10 years and he discovers some
ID: 2543566 • Letter: V
Question
Vaughan has been in an audit engagement for about 10 years and he discovers some discrepancies in the accounts prepared by the Chief Financial Officer (CFO). The CFO seems to spend the company’s money for his personal benefits. And just two months ago the CFO bought new chandeliers for his holiday house in Taveuni. The CFO is a childhood friend of Vaughan’s audit partner and they usually play touch rugby together. Vaughan is unsure whether to raise the matter with the CFO. Vaughan is highly concerned about the accuracy of the accounts and the audit partner is also waiting for the timely completion of the audit. Required: Use an ethical decision making model used by accountant and auditors to determine the appropriate courses of action available to Vaughan.
Explanation / Answer
Vaughan should adhere to the professional code of ethics in accounting and auditing in this case and report the discrepancies in the accounts that have been prepared by the CFO. Vaughan should use the ethical framework and should consider the key paradigms like integrity, objectivity, professional competence and due care, model of fairness and should apply a fact-oriented model in the audit.
Vaughan, as per the ethical decision making model used by accountant and auditors, should be straightforward and honest in all professional dealings. There should be objectivity while he is discharging his duties and his professional activity and duty should be free from any conflict of interest. Model of fairness requires Vaughan to not breach his duty knowingly. Many third parties will rely on his audit report to make decisions and providing them with false information will be against the model of fairness.
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