Case#$1$ Pressure from Client to Present a Positive Financial Picture

Skyline Technologies Inc. is a growing technology company that is currently seeking

significant venture capital funding to expand its operations. As the audit team prepares

to review the financial statements, management expresses concern that reporting a loss

for the year could jeopardize the company's ability to secure this funding. They

emphasize the importance of presenting the company's financial position as

optimistically as possible, suggesting that certain expenses could be deferred or

understated to improve the bottom line. There is implicit pressure on the audit team to

cooperate with management$$s requests to present a more favorable financial picture.

Questions:

$1.$ Objectivity Under Pressure: How should the audit team maintain objectivity in

this situation, despite the implicit pressure from management?

$2.$ Audit Response: What steps should the audit team take to ensure that their

audit procedures and conclusions are not influenced by management$$s desire to

secure funding?

$3.$ Ethical Considerations: Discuss the ethical responsibilities of the audit team in

this scenario and how they should respond if management continues to push for

adjustments that could compromise the integrity of the financial statements.