Question

Q No.15: In a discussion between Peters and Ferrel, two auditing students, Peters made the following statement:

   “A CIA is a professional person who is licensed by the state for the purpose of providing independent expert opinion on the fairness of financial statements. To maintain an attitude of mental independence and objective in all phase of audit work, it is advisable that the CIA not fraternize with client personnel. The CIA should be courteous but reserved and dignified at all times. Indulging in social contacts with clients outside of business hours will make it more difficult to be firm to be firm and objective if the CIA finds evidence of fraud or of unsound accounting practices.”

Ferrel replied as follows:

     “You are 50 years behind the times, Peters. An auditor and a client are both human beings. The auditor needs the cooperation of the client to do a good job; you’re much more likely to get cooperation if you’re relaxed and friendly rather than being cold and impersonal. Having a few beers or going to a football game with a client won’t keep the CIA from being independent. It will make the working relationship a lot more comfortable, and will probably cause the client to recommend the CIA to other business people who need auditing services. In other words, the approach you’re recommending should be called ‘How to Avoid Friends and Alienate Clients.’ I will admit, though, that with so many women entering public accounting and other women holding executive positions in business, a few complications may arise when auditor-client relations get pretty relaxed.”

    Evaluate the opposing views expressed by Peters and Ferrel.

Answer 1

Explanation

Evaluation of Views of Peters - Views of peters are very traditional and not Dynamic. In todays world, CPA need to be social and leader. This behaviour would make CPA non approachable. This will also effect of business of CPA. This kind of attitude should not be recommended and CPA should also change themselves with time.

Evaluation of views of Ferrel - Views of Ferrel are very dynamic and modern. In todays world auditor is also regarded as problem solver, consultant, advisor besides watchdog. It broadens the role of CPA. This behaviour will create two way communication and develop the relationship of CPA with client more stronger. Such relationship would ultimately effect the business of CPA positively through recommendations.