The audit of KBC Solutions by Carlson and Smith, CPAS, was schedukd to end on February 28, 2016. However, Rick Carlson was uncertain whether it could happen. As the review partner, he had just completed going over the work paper files of the senior auditor in charge of the engagement, Grace Sloan, and had way too many questions to wrap things up by the end of the week. Rick called Grace 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? To say Grace was stressed out would be an understate ment. This was her first engagement as a senior and she wondered whether it would be her last. Grace knew she had to make a convincing case for her judgments or suffer the consequences. She responded to cach point as follows. 1. The client had problems with their systems and had to contact the vendor for a duplicate copy of the relevant imvoices. She expects the copy within two days. 2. The client soemed 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 beiow expected norms, there was no reason not to acept the client's explanation for those not confirmed as being correct in amount and due date. Grace knew her answers would not completely satisfy Rick. She did, however, believe there were extenuating circumstances she felt compelled to explain even though it might flect negatively on her kadership abilities. She ex plained that the audit leam pressured her to let certain maters go because they were behind schedukle in completion of the audit. She was convinced by the majority to trust the client on outstanding issues, which included the three raised by Rick. Rick was not very happy with the explanation. He wondered about the professional judgments exercised by Grace and what her future with the firm should be. Questions 1. Critically evaluate the judgments made by Grace as the senior by using the KPMG Professional Judgment Framework. 2 Did Grace violate any rules of conduct in the AICPA Code? Explain. 3. Does Rick have any ethical obligations in this matter? What should he do about signing off on the audit and why?