CASE 5.1 CARDILLO TRAVEL SYSTEMS, INC. 375 Questions

1. Identify the accountants in this case who faced ethical dilemmas. Also identify the parties who would be potentially affected by the outcome of each of these dilemmas. What responsibility did each accountant owe to these parties? Did the accountants fulfill these responsibilities?

2. Describe the procedures an auditor should perform during a review of a clients quarterly financial statements. In your opinion, did the Touche Ross auditors who discovered the $203,000 adjusting entry during their 1985 second-quarter review take all appropriate steps to corroborate that entry? Should the auditors have immediately informed the audit partner, Helen Shepherd, of the entry?

3. In reviewing the United AirlinesCardillo agreement, Shepherd collected evidence that supported the $203,000 adjusting entry as booked and evidence that suggested the entry was recorded improperly. Identify each of these items of evidence. What characteristics of audit evidence do the professions technical standards suggest auditors should consider? Analyze the audit evidence that Shepherd collected regarding the disputed entry in terms of those characteristics.

(Knapp 375) Knapp, Michael C. Contemporary Auditing, 10th Edition.