After answering her cell phone, Kayleigh Caudell cradled it between her right ear and shoulder as she continued to scroll through a large electronic file searching for a client document.  "Hello, Kayleigh. It's me, your favorite audit manager." Kayleigh gritted her teeth momentarily before responding. "Hi, Lauren."
"Did I catch you at a bad time?"
"Oh, I'm trying to find the invoice for that large year-end sale made to Coale Enterprises. The sale you asked about." Kayleigh, an audit senior, was frustrated, which was her customary state of mind when clearing review comments made by her superiors. In this case, the review comment had been written by Lauren Mercedes, the audit manager assigned to the Warmker & Co. audit engagement-and the individual on the other end of the line.
"Oh yeah. Like I said in my review comment, I would like to know if Warmker added any sweeteners to the deal to convince Coale to place its normal January sales order three weeks early." Kayleigh didn't respond as she rolled her eyes and softly shook her head. She was convinced there was no need to investigate the given sale, particularly since the deadline for signing off on Warmker's annual financial statements, February 14, was only three days away. After discovering the transaction during the year-end sales cutoff tests, Kayleigh had assumed Warmker had somehow persuaded Coale Enterprises, one of the company's largest customers, to accelerate the large sales order, which meant that the sale was booked by Warmker during the final week of the fiscal year under audit rather than the following year. In Kayleigh's opinion, that fact-or possibility- didn't undercut the legitimacy of the sale. And although the sale had marginally improved Warmker's fourth-quarter operating results, there was no way the improvement could be considered material.
"Well, I didn't call you about the Coale transaction," Lauren continued. "A few minutes ago, I was flipping through our workpapers for last year looking for something when I noticed a brief memo you wrote almost exactly one year ago that concerned the proposed sale of Warmker's Crawford Division. Crawford was the operating unit in the Southeast Sales Region, which Warmker finally got rid of eight months ago, in mid-June."
"Yeah, I remember that memo." Kayleigh made a concerted effort to conceal her impatience with Lauren. The audit manager was a stickler for details. No doubt, Lauren was about to send her on another wild goose chase.
"In your memo, I noticed a discussion of a clawback clause in the sales agreement between Warmker and Anwar & Kadira, the Georgia company that bought the Crawford Division. Do you remember that?"
"Oh yeah. Yeah, I remember." Kayleigh knew immediately what Lauren was about to ask her to do.
"I don't think it will pose any problem, especially since the transaction wasn't that significant in dollar terms, but the clawback clause is obviously an item that should have been addressed in the contingencies section of the audit program."

Questions
1. What general information must auditors of public companies include in their workpapers for the audit procedures they apply? Did Kayleigh’s instructions to Alecia concerning the revision of the summary contingencies memo conflict with the PCAOB’s audit documentation standards? Explain.
2. After the unpleasant meeting with Alecia, what do you believe Kayleigh should have done? What do you believe she actually did? What would you have done in similar circumstances, and why?
3. Now, place yourself in Alecia’s position. What do you believe she should have done after her meeting with Kayleigh? What do you believe she actually did? What would you have done in similar circumstances, and why?
4. If Lauren Mercedes learns of the request Kayleigh made of Alecia, what should the audit manager do? Should Kayleigh be subject to some type of punishment?
5. Is it possible to be “marginally” dishonest? Defend your answer.