Ethics and Related Issues
Brief Review of the Case from the Auditors Point-of-View
Beaudean who has just become a senior partner at Cardinal and Coyote Audit firm has been tasked with doing a background check on a new client Jost Furniture International by Yancy Corliss a new partner at the firm where he works. Jost Furniture International is upbeat that Cardinal and Coyote stand to get the audit as long as they submit a reasonable bid. Background checks were to be conducted to ascertain whether Jost had potential risk as a future client to Cardinal and Coyote. Beaudean has other two staff members Vinnie Gabelli and Jackie Oloff with whom he will carry out Jost Furniture International Assessment. It is very risky to take on Jost Furniture International as a client because of the concerns that the predecessor audit firms had raised. An audit firm that had helped Jost Furniture with its Initial Public Offer (IPO) and audited its financial statements for five years resigned in 2007 after issuing a modified opinion on its 2006 financial statements. The firm's unqualified opinion pointed at Jost's persistent operating losses which was an impediment...
The firm that took over from the Big-Four that audited Jost financial statements for 2007 also raised going concern questions. The manner in which firms that audited Jost financial statements were disqualified raises a lot of questions about its operations considering that different regional CPA firms that audited Jost financial statements for 2008 and 2009 were also disqualified. It is also thought provoking why Jost in a span of four years had dispensed with three company controllers. That is a very high rate of staff turnover. The fact that Jost International had violated a debt covenant was reason enough to avoid having any business relationship with them. Finally, the temporary cash flow problem that Jost had was an indication that they had liquidity problems.
Ethical dilemmas faced by or caused by the auditor
Cardinal and Coyote is in business and needs clients like the Jost Furniture International that have propensity for growth yet in discharging its responsibilities the team that has been tasked with doing the background check realizes that it is not right to have Jost as one of…
