2 The audit of HBH Enterprise by Caliph and Salleh, CPAs, was scheduled to end on April 30, 2018. However, Caliph was uncertain whether it could happen. As the review partner, he had just completed review the paper work files of the senior auditor in charge of the engagement, Ghalijah, and had way too many questions to wrap things up by the end of the week. Caliph called Ghalijah into his office and asked her about some questionable judgments she had made. He hoped her explanations would be satisfactory and he could move on with completing the audit. 1. Why did you approve the accounting for new acquisitions of plant and equipment that were not supported by adequate underlying documentation? 2. Why did you accept the client's determinations of accrued expenses rather than make your own independent judgments? 3. How can you justify relying on last year's work papers to determine the proper allowance for uncollectibles one year later? Ghalijah was stressed out would be an understatement. This was her first engagement as a senior and she wondered whether it would be her last. Ghalijah knew she had to make a convincing case for her judgments or suffer the consequences. She responded to each point as follows. 1. The client had problems with their systems and had to contact the vendor for a duplicate copy of the relevant invoices. She expects the copy within two days. 2. The client seemed to have a reasonable basis for those judgments so she saw no reason to delay completion of the audit over the accrued expenses. 3. Although the confirmation rate on the receivables was slightly below expected norms, there was no reason not to accept the client's explanation for those not confirmed as being correct in amount and due date. Ghalijah knew her answers would not completely satisfy Caliph. She did, however, believe there were explanatory circumstances she felt compelled to explain even though it might reflect negatively on her leadership abilities. She explained that the audit team pressured her to let certain matters go because they were behind schedule in completion of the audit. She was convinced by the majority to trust the client on outstanding issues, which included the three raised by Caliph. Caliph was not very happy with the explanation. He wondered about the professional judgments exercised by Ghalijah and what her future with the firm should be. Required 1. Critically evaluate the judgments made by Ghalijah as the senior under the fundamental principle code of conduct. 2. Does Caliph have any ethical obligations in this matter? What should he do about signing off on the audit and why