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There is far greater risk in taking no action. Two options exist for the auditor in this scenario. The auditor can tell him or herself that he or she need not be concerned, given that Wagner and the other managers at the company did not volunteer the troubling information. At present, the data available to the auditor makes it seem as if the company is aboveboard. But should Dataserve's financial dealings come under scrutiny by the public eye, this defense is unlikely to stand up either in a legal court or the court of public opinion. The financial reputation of the auditor's firm is likely to be in jeopardy if he or she goes through in signing off on the information and says the audit is valid, despite Wagner's insinuations. The auditor should demand further information. In short, if Wagner is afraid, so the auditor should be afraid as well!

b) Express your personal opinion as to the appropriate course of action and provide reasoning to support your opinion.

Ethically speaking, simply not knowing something because of a refusal to investigate is no excuse for ignoring potential irregularities...

Thus, demanding more knowledge of the company before the audit is submitted seems wise. The auditor should, under all circumstances, demand to receive more clarification, even at the conclusion of an audit, if more information is revealed that calls into question the data.
While it is true that an auditor is meant to serve his or her client's best interests, this does not go so far as helping a firm perpetuate a fraud by ignoring troubling evidence. The auditor also has a responsibility to the integrity of his or her own firm, and his or own professional future. Agreeing to comply could result in repercussions for the auditor's firm, and possible sanctions, if they were found to refuse to investigate possible improprieties. Wagner's refusal acts as a 'red flag,' just as much as an improper figure on a balance sheet.

Reference

Baysinger, Steve. The auditor's ethical responsibility. Excerpted from The

complete guide to the CQA. 2008. Retrieved January 23, 2010.

http://www.qualityamerica.com/knowledgecente/articles/CQApg42-44.html

Sources used in this document:
Reference

Baysinger, Steve. The auditor's ethical responsibility. Excerpted from The

complete guide to the CQA. 2008. Retrieved January 23, 2010.

http://www.qualityamerica.com/knowledgecente/articles/CQApg42-44.html
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