Audit Dilemma Student`s

AuditDilemma

1.Ethical dilemma for Barbara

Auditorsact as a key mechanism to enhance credibility for financialstatements. Their conduct of conduct is governed by postulatedprinciples in which every auditor or accountant is expected toadhere. Some of the set principles that govern the code of conduct ofthis professions include integrity, objectivity, independence,professional competence and due care, and confidentiality. Despitethe code mentioned above of conduct expected of the auditors andaccountants, the application or observance has been a challengeraising a conflict between the auditor and the management. Managershave always impaired with the ethical code of conduct to auditorsleading to the so call audit dilemma.

Auditdilemma arises when the auditor is fixed in a difficult situation ofdeciding whether to ignore his professional code of conduct tosatisfy manager interest. In the case of Barbara the ethical dilemmacaptured, is to whether Barbara should ignore the small sample itemsas directed by Jack bean. According to Barbara computation, the smallsamples indicate a significance variance and that ought to be part ofthe audit questions. The misstatement being material, the auditor(Barbara) has a duty to raise issue of concern to that for furtherexplanation. When Jack orders Barbara to ignore such misstatement, heis impairing the independence of the accountant of reporting a trueand fair value of the organizations financial report. Therefore, heis placed in a difficult decision of deciding on whether to adhere tothe professional ethics and report the misstatement or listen to Jackignore the misstatement.

2.Six-step approach to resolving ethical dilemma

Inorder for Barbara to resolve the above-discussed dilemma, can use thefive-step approach. The five steps to be applied include

  1. Barbara should get the relevant facts of the misstatement which already he has calculated and found that it is material.

  2. Secondly he has to identify the ethical issues from the situation.

  3. Thirdly he has to determine who will be affected by the outcome of the said dilemma and how it will affect him or Jack Bean,.

  4. He then need to find out the other mechanism of resolving the dilemma,

  5. The fifth step is to identify the most likely consequence of the alternatives suggested

  6. Lastly is to decide the appropriate action to take in resolving the matter.

Reference

KendraJ. (2014). Ethical Dilemma in Accounting. Retrieved 11th, November2015from http://smallbusiness.chron.com/ethical-dilemmas-accounting-3740.html