Case 5-4 Audit Client Considerations

Case 5 4 Audit Client Considerationslanny Beaudean Joined The Cpa Firm

Case 5-4 involves Lanny Beaudean, a senior auditor at the CPA firm Cardinal & Coyote LLP, who is tasked with assessing a potential new client, Jost Furniture International. The firm is considering submitting a bid for the audit engagement, which requires careful background checks and evaluation of the client’s business practices, growth prospects, and risk factors. Beaudean is leading a small team to gather relevant information under tight deadlines, influenced by firm management’s expectations and desire to secure a lucrative client that could also offer future advisory opportunities. The case highlights issues related to professional skepticism, ethical considerations in client acceptance, and the importance of thorough due diligence in audit planning.

Paper For Above instruction

In analyzing the case of Lanny Beaudean and the potential engagement with Jost Furniture International, it is essential to consider the actions and viewpoints of Beaudean from an auditor’s ethical and professional perspective. Beaudean, as a senior member of the audit team, demonstrates a proactive approach to assessing a prospective client, an act fundamental to maintaining audit quality and integrity. His leadership role signifies responsibility in collecting unbiased, comprehensive information about Jost’s financial and operational health, which will influence the firm’s decision on whether to proceed with the bid. Beaudean’s enthusiasm for the assignment reflects a positive attitude towards professional growth but must be balanced with an acute awareness of ethical duties, such as skepticism and objectivity, especially given the firm’s motivation to secure the engagement for financial gain.

Key behaviors displayed by Beaudean include diligent team coordination, thoughtful inquiry into the client’s background, and an effort to understand the client’s industry and expansion plans. He operates within an ethical framework that prioritizes due diligence and risk assessment, demonstrating integrity in attempting to identify potential issues that could affect audit risk or corporate reputation. However, ethical dilemmas may arise if the firm’s desire to win the client clouds objectivity or leads to overly favorable perception of the client’s disclosures. For Beaudean, balancing his commitment to thoroughness with the pressure to deliver quick results poses a challenge, as rushing or superficial assessments could compromise professional judgment. Furthermore, the urgency implied by firm management could tempt shortcuts or insufficient inquiry, which raises concerns about diligence and independence.

The philosophical approach to ethical decision-making most appropriate in this scenario aligns with the principles of Kantian ethics, emphasizing duty, integrity, and the obligation to serve the public interest. Practically, this involves adhering to professional standards, such as those established by the AICPA or IFAC, which guide auditors to conduct comprehensive risk assessments free from conflicts of interest or external pressure. An approach rooted in ethical reasoning would advocate for transparent procedures, diligent evidence gathering, and clear documentation. This contrasts with pragmatic shortcuts that might prioritize winning the audit over proper due diligence. Implementing robust internal controls, accountability measures, and a corporate culture that values ethical conduct can mitigate risks and ensure decisions are based on objective analysis rather than solely commercial considerations.

Alternatives to address the ethical concerns and procedural challenges include: (1) establishing a formal checklist or framework for client assessment that emphasizes risk factors and ethical considerations; (2) involving an independent review by senior partners to validate findings before decision-making; (3) ensuring clear communication within the team regarding the importance of skepticism and objectivity; and (4) advocating for sufficient time and resources dedicated to due diligence, rather than rushing the process to meet deadlines or expectations. Additionally, fostering an environment where team members feel empowered to voice concerns or uncertainties without fear of reprisal enhances ethical safeguards. These strategies collectively promote a culture of integrity and rigor essential for maintaining public trust and professional reputation.

If I had been in Beaudean’s position, I would have prioritized comprehensive, unbiased information gathering over expediency. I would have advocated for transparent communication with management about the importance of thorough due diligence and the potential risks of rushing the assessment. I would also have ensured that team members maintained independence and skepticism, avoiding assumptions based on industry or geographic familiarity alone. Recognizing the ethical responsibility to serve the public interest, I would emphasize adherence to established standards, such as integrity, objectivity, and due care, as fundamental to the audit process. Developing a systematic approach to client evaluation that balances time constraints with meticulous investigation would be crucial. Ultimately, my actions would reflect a commitment to professional ethics and the safeguarding of audit integrity, even under external pressures.

References

• American Institute of Certified Public Accountants (AICPA). (2019). Code of Professional Conduct. AICPA.
• International Federation of Accountants (IFAC). (2018). International Code of Ethics for Professional Accountants. IFAC.
• Hopwood, W., Mellody, L., & McKeown, J. (2018). Financial Accounting: A Business Perspective. McGraw-Hill Education.
• Louwers, T. J., Ramsay, R. J., Sinason, D. H., & Strawser, J. R. (2019). Auditing & Assurance Services. McGraw-Hill Education.
• Simunic, D. A. (1980). The relationship between pricing and risk in auditing. The Accounting Review, 55(1), 143-156.
• Gray, I., & Manson, S. (2015). The Audit Process: Principles, Practice and Cases. Cengage Learning.
• Wallace, W. A. (2019). Ethical considerations in audit client acceptance and continuance. Journal of Business Ethics, 162(1), 157-173.