You are the Chief Financial Officer of Friend and Fun Company, and have developed close relationships with most of your senior executive staff, including the new Director of Finance. You hired a Director of Finance, Max, 1 year ago. Max was previously the Finance Director at Universal Company. Max was an excellent hire for Friends and Fun Company because of his expertise in Corporate Governance. He has set very high standards for Friends and Fun Company.

Today, you are signing-off on a large dollar payment batch, and performing your normal reviews and checks prior to authorization. You notice a payment to ABC Plumbing and decide to further investigate the paperwork. ABC Plumbing is the companys regular plumber and normally does a lot of work in the building; however, you are not aware of any plumbing activity in the building recently. In the past, ABC Plumbing has also done work in your personal home, which was arranged and managed by Friends and Fun Companys Executive Director of Facilities, Sam Fields. Prior to ABC Plumbing, performing services at your home, you had the Internal Audit Manager review ABCs invoice to ensure the rates being charged were comparable rates that ABC normally charged its customers. They were. The invoice for work performed at your residence was billed to your home address and were paid from your own personal account.

As it turns out, the invoice, billed to Friends and Fun Company, which you are currently reviewing was for a payment due to ABC Plumbing, for plumbing services rendered at the residence of Sam Fields. You are puzzled, you have been to Sams home many times, and you have seen the Director of Finance there on occasion. During your visits you saw an extensive amount of remodeling and plumbing going on. However, the invoice you are currently reviewing is of a smaller dollar value and does not mention several items of work that you have noticed going on at Sams home. You decide to investigate further, and find several older invoices for plumbing services at the same property, billed to Friends and Fun Company. These invoices were approved and submitted for payment by the Director of Finance, Max. These invoices had been included in smaller batches of payments that did not require your approval. Max was authorized to sign-off on Accounts Payable batches that did not exceed $25,000.

In addition, you found out that the accounts payable accountant trainee received a stack of invoices due for payment (including the ABC plumbing invoice in question), had been scheduled for annual leave and was told by Max that all invoices must be reviewed by the end-of-the day or she would not be able to take her scheduled leave. The trainee felt pressured to quickly review invoices, and was not able to sufficiently perform her regular due diligence for accounts payable processing.

Use the AICPA Professional Code of Conduct.

Who are the key parties who can influence your decision?