Question
You are the partner on the audit of Datasave Inc., a small publicly held corporation that manufactures high-speed disk drives for the computer industry. The
You are the partner on the audit of Datasave Inc., a small publicly held corporation that
manufactures high-speed disk drives for the computer industry. The audit of Datasave had
been progressing satisfactorily until you were about a month away from issuing your opinion.
Suddenly, and quite mysteriously, Carl Wagner, the financial vice president, resigned. John
Ross, who had been a manager with a large CPA firm, was quickly hired to replace Wagner.
Although the change in Datasaves chief financial officer caused some disruption, the audit
was completed on a timely basis. As the last step in the audit process, you have prepared
the representation letter for signing. You wanted the letter to be signed by William Cox, the
president; Robert Star, the controller; and Wagner, who occasionally came to the companys
offices to resolve matters regarding his past compensation. The signatures of Cox and Star
were obtained, and you approached Wagner for his signature. In response to your request,
Wagner replied, I no longer am employed with this crazy company. Why should I take any
responsibility for the financial statements? Despite your attempts to persuade him, Wagner
refused to sign the letter. Wagner also refused to discuss the reasons for his resignation, other
than to say the reasons were personal. When you discussed the problem of Wagners refusal to
sign with Cox, he indicated that there was no problem because Ross would sign the letter. You
see this as a possible solution, but you are aware that Ross knows very little about the financial
statements for the year under audit. Also, you are still somewhat concerned about the reasons
for Wagners resignation.
a. Describe fully the alternatives that are available to you in this situation.
b. Express your personal opinion as to the appropriate course of action and provide reasoning
to support your opinion.
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