Diane Harris, a PA, is the auditor of Fine Deal Furniture, Inc. In the course of her audit for the year ended December 31, 2011, she discovered that Fine Deal had serious going-concern problems. Henri Fine, the owner of Fine Deal, asked Diane to delay completing her audit.
Diane is also the auditor of Master Furniture Builders Ltd., whose year end is January 31. The largest receivable on Master Furniture’s list of receivables is Fine Deal Furniture; the amount owing represents about 45 percent of Master Furniture’s total receivables, which, in turn, are 60 percent of Master Furniture’s net assets. The management of Master Furniture is in a hurry to get the January 31, 2011, audit finished because the company has made an application for a sizable loan from its bank to expand its operations. The bank has informally agreed to advance the funds based on draft financial statements submitted by Master Furniture just after the year end.
Furniture is not aware of Fine Deal’s problems and is certain the amount will be collected in full.
REQUIRED
What action should Diane take and why?