Read the following case and answer the following questions:

1. Identify and discuss the ethical dilemma in this case.
2. What alternative actions are available to you? What are the potential consequences of each action?
3. What are the relevant facts and circumstances in this case that should influence your decision?
4. What course of action will you take? Please explain why.

The Case

You have worked as a staff auditor for two and one-half years and have mastered your job. You will likely be promoted to a senior position after this busy season. Your current senior was promoted about a year ago. He appreciates your competence and rarely interferes with you. As long as he can report good performance to his manager on things she wants, he is satisfied. The manager has been in her position for three years. She is focused on making sure audits run smoothly and is good at this. She is not as strong on the softer skills. Although she is approachable, her attention span can be short if what you are saying does not interest her. You are aware that she expects her teams to perform effectively and efficiently during this busy audit season and she hopes to be promoted to senior manager as a result, bringing her closer to her goal of making partner.

The audit of the financial statements of ABC, Inc., a private company, is in the final stages. This has been a relatively difficult audit because of some complicated accounting transactions that the client made. In addition, the client has experienced unexpected turnover in personnel. This has made interacting with the client and getting the information you need in a timely manner problematic. Despite the difficulties encountered in the audit, your senior has asked you to perform wrap-up procedures for the audit. He tells you that you have been through the process many times before and that he is confident of your abilities and experience. You see this as your opportunity to prove that you have the skills needed to be promoted to senior before the next audit season. To wrap up the audit, you perform analytical procedures and a final evaluation of materiality levels, inherent risk, and control risk. As you review the work papers, you notice an item that may indicate a potential misstatement. If the item is investigated further, it will delay the issuance of the audit report for up to two weeks and increase the hours spent on the audit without an increase in audit fees paid by the client. As you consider what you should do, you decide that you need to discuss the matter with your senior.

Later that afternoon, you meet with your senior, explain your concerns, and ask for his advice. He tells you that this audit is already over budget, and that the client is anxious to have the audit completed since the audited financial statements are needed to renegotiate a loan at the clients bank. If the audit completion is delayed, the firm will most likely lose the client. He asks you how likely it is that the misstatement has occurred. You tell him you do not know without performing the additional procedures. He discourages you from doing this since the more time you spend on the engagement, the less profitable it will be for the audit firm, which will displease the manager and her superiors. In addition, it could keep you, your senior, and the manager from being promoted when the audit season is over.

You leave the meeting with your senior not knowing what to do. You have to consider how strongly you feel about the possibility of misstatement, the consequences of not performing additional procedures when a misstatement may be present, and the consequences of performing additional procedures when there is no misstatement.