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6-36 PCAOB, ERNST & YOUNG (LO S, 6) In August 2011, the PCAOB barred two former Ernst & Young LLP (EY) employees from auditing public

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6-36 PCAOB, ERNST & YOUNG (LO S, 6) In August 2011, the PCAOB barred two former Ernst & Young LLP (EY) employees from auditing public companies, alleging they provided misleading documents to PCAOB inspectors who were evaluating the audit firm's work. One partner was barred for three years, and a senior manager was barred for two years. The PCAOB said that shortly before its inspectors were to inspect an EY audit of an unidentified company, the two auditors created, backdated, and placed in the audit files a document concerning the valuation of one of the audit client's invest- ments. One of the auditors allegedly authorized other members of the audit team to alter other working papers in advance of the inspection. The changes were not disclosed to the PCAOB. EY indicated that the conduct of the two auditors had no impact on the client's financial statements or on EY's audit conclusions. The two Disciplinary Orders, available at the PCAOB website, are PCAOB Release No. 105-2011- 004 and PCAOB Release No. 105-2011-005. What is audir documentation, and why is it important to a quality audit? b. Given that the auditors' conduct did not affect the client's finan- cial statements or EY's conclusions, why was this situation over audit documentation of concern to the PCAOB? Suppose your superior asked you to add or alter an audit work- paper after completing an audit engagement. Use the framework for ethical decision making presented in Chapter 1 to outline your actions in this situation

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