Arthur sat back in his chair and looked at the other accountants who were working on their laptops. How had he gotten himself into this situation?

It began last year when he was hired by Castor Gotlieb LLP, the largest of the midsize accounting firms in the country.

Arthur graduated at the top of his class with a bachelor’s degree in accounting. He had been recruited by all the major accounting firms, but he chose CG, as it was called, because he liked the “vibe.”

During the interview, Arthur and the recruiter had talked at length about honesty and personal integrity. These were the values that Arthur prized the most, and he was assured that honesty and integrity were consistent with the values and mission statement of CG.

At the first client that Arthur was sent to, he conducted the basic aspects of the audit. But he showed competence and an insight into potential audit problems, so on the next job he was given more complex aspects of the audit. He accomplished those on time and was given a very positive evaluation by his audit senior, Jonathan Lee.

Arthur enjoyed the work but not necessarily the long hours, especially during tax season. It was difficult to work from nine until five at the client’s office and then return to CG’s office, where he completed tax returns until eleven at night, only to repeat the entire routine the next day and each day after that. He only had one day off each week.

“Don’t worry,” he was advised by his manager, Stella Reese. “We book this time and then take time off during the summer, when there’s less work to be done.”

In the second week of March, Arthur was sent work on the audit of the Pine Crest Furniture Company. Pine Crest manufactured and sold contemporary living room and dining room furniture through two stores that were located at either end of town. Arthur was responsible for the inventory section of the file. He had a budget of forty hours to complete that part of the audit because the junior had spent forty hours on inventory section last year. The audit of the inventory was straightforward, and Arthur was confident that he would be able to complete that section of the file under budget.

On the second evening of the audit, while he was back in the office calculating the taxable capital gain for a wealthy client, Arthur realized that there might be an internal transfer pricing problem at Pine Crest with respect to one model of dining room furniture that had been moved from one store to the other store. For the next two days, Arthur spent an extra amount of time examining the internal transferring price scheme of the company. He carefully documented all his findings. After spending nearly fifty hours on the inventory section, Arthur concluded that there was no problem with the inventory. Arthur had been mistaken and was embarrassed that he had spent so much time on the inventory.

He felt that if he had just followed standard audit procedures, he could have completed the section within the budget. Consequently, he reported that he had spent only forty hours when he had really spent fifty.

Arthur was reluctant to falsify his time report, but he justified his action on the basis that he was new and inexperienced.

He also said that the extra ten hours was a learning experience. Also, no one would know that he had completed the time report incorrectly since Arthur had a reputation for having high integrity.

At the conclusion of the Pine Crest audit, Arthur received a glowing assessment from Jonathan Lee, the audit senior, as well as Stella Reese. Arthur’s performance on the next two jobs was also of a high caliber, and he was promoted to intermediate staff accountant at the end of the year. Ms. Johnson, the senior partner at CG, had gone out of her way to congratulate Arthur on his work ethic and say how pleased she was that he was part of the CG family.

The following February, Arthur was called into a meeting to discuss the upcoming Pine Crest Furniture audit to be conducted next month. In the meeting were Jonathan Lee, Stella Reese, and the three other staff accountants who had been on the Pine Crest audit last year........

Question:-

1. What should Arthur do? Why?