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.