Question

Vaughan has been in an audit engagement for about 10 years and he discovers some discrepancies in the accounts prepared by the Chief Financial Officer (CFO). The CFO seems to spend the company’s money for his personal benefits. And just two months ago the CFO bought new chandeliers for his holiday house in Taveuni. The CFO is a childhood friend of Vaughan’s audit partner and they usually play touch rugby together. Vaughan is unsure whether to raise the matter with the CFO. Vaughan is highly concerned about the accuracy of the accounts and the audit partner is also waiting for the timely completion of the audit.

Required: Use an ethical decision making model used by accountant and auditors to determine the appropriate courses of action available to Vaughan.

Answer 1

This is an ethical issue of true and fair accounting, and timely presentation of accounts for stakeholders.

Action: Mr. V should recheck the matter whether the company’s fund is really used for personal purpose or not. In the course of doing so he should check invoice, payment voucher, and inventory register. The purpose or motive of such purchasing also could be asked to the concern authority. Taking into consideration all these aspects if he sure about such fraud, he must raise the fact without making delay. Mr. V should take action so that the matter is reflected in the auditor’s report and should look into the case so that the audit is complete in time.

If he is not entertained or if there is non-cooperation, he should leave the company showing all necessary grounds.