puyer Ton.com 507esepul Luid-649798CM ART David Norris is the manager of the audit of Friars for Life (FFL), a new-age health food company headquartered in Providence, Rhode Island, that has been expanding by leaps and bounds Norris is preparing for a meeting with Alan Morse, the partner in charge of the engagement. The meeting on January 4, 2019 concerns three controversial decisions by the auditors. They are described as follows: Why are we allowing the client to record $1 million of revenue in 2018 for a January 12, 2019 scheduled transaction whereby FFL agreed to sell $1 million of health food products to Ocean State Health in return for a stock issuance of that cpmpany? Why didn't we insist FFL writedown $100.000 in fixed assets as being impaired based on calculations as of December 31, 2018. Page 526 the close of the fiscal year? Why was Lindsay Farrow removed from the position of audit senior on the engagement? Norris was very concerned about these matters as he made the final decision in each case. Norris went back through his personal audit notes and workpaper explanations for each of these issues. The January 12, 2019 transaction was recorded in 2018 at the client's insistence. Norris was concerned the client might pull the engagement if he did not go along the impairment issue was one of judgment. Norris reasoned that, since the impairment was temporary, he would accept the client's position not to writedown the fixed assets and wait to record any loss until 2019. The Lindsay Farrow matter was different. Norris had dated Lindsay for six months during the audit of FFL, but their relationship did not end amicably Questions 1. Describe the leadership style of David Norris? Include in your explanation the nature of the relationship he had with Lindsay Farrow, 2. Do you consider the decisions made by Norris dysfunctional audit behavior? Explain. 3. What should Alan Morse do once he learns about these issues! puyer Ton.com 507esepul Luid-649798CM ART David Norris is the manager of the audit of Friars for Life (FFL), a new-age health food company headquartered in Providence, Rhode Island, that has been expanding by leaps and bounds Norris is preparing for a meeting with Alan Morse, the partner in charge of the engagement. The meeting on January 4, 2019 concerns three controversial decisions by the auditors. They are described as follows: Why are we allowing the client to record $1 million of revenue in 2018 for a January 12, 2019 scheduled transaction whereby FFL agreed to sell $1 million of health food products to Ocean State Health in return for a stock issuance of that cpmpany? Why didn't we insist FFL writedown $100.000 in fixed assets as being impaired based on calculations as of December 31, 2018. Page 526 the close of the fiscal year? Why was Lindsay Farrow removed from the position of audit senior on the engagement? Norris was very concerned about these matters as he made the final decision in each case. Norris went back through his personal audit notes and workpaper explanations for each of these issues. The January 12, 2019 transaction was recorded in 2018 at the client's insistence. Norris was concerned the client might pull the engagement if he did not go along the impairment issue was one of judgment. Norris reasoned that, since the impairment was temporary, he would accept the client's position not to writedown the fixed assets and wait to record any loss until 2019. The Lindsay Farrow matter was different. Norris had dated Lindsay for six months during the audit of FFL, but their relationship did not end amicably Questions 1. Describe the leadership style of David Norris? Include in your explanation the nature of the relationship he had with Lindsay Farrow, 2. Do you consider the decisions made by Norris dysfunctional audit behavior? Explain. 3. What should Alan Morse do once he learns about these issues
