Auditing assignments
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ch1groupassignment.docx1-38. In a discussion between Peters and Fenel, two auditing students, Peters made the following statement: "A CPA is a professional person who is licensed by the state for the purpose of providing an independent expert opinion on the fairness of financial statements. To maintain an attitude of mental independence and objectivity in all phases of audit work, it is advisable that the CPA not fraternize with client personnel. The CPA should be courteous but reserved and dignified at all times. Indulging in social contacts with clients outside business hours
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 CPA from being independent. It will make the working relationship a lot more comfortable, and will probably cause the client to recommend the CPA 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 in a 1-2 page paper (double-spaced) submitted in Blackboard by 8am, Tuesday, January 17. Work together according to the groups below with each group submitting one paper.
Peters is taking a very narrow view of the CPA's role in the American economy. The reserved, aloof attitude recommended by Peters was perhaps justified a half-century or more ago when the primary objective of many audits was the discovery of errors, defalcations, and other forms of fraud.
In the current era, the auditors' role has changed from that of a "detective" to that of accounting experts whose breadth of experience in the audit of many companies enables them to offer clients constructive advice which leads to compliance with accounting principles, improved accounting methods, better financial administration, and more profitable operation.
To fulfill this broader role of advisers as well as impartial reviewers, the auditors need the cooperation of client personnel at all levels. They need managers and employees to speak freely of their problems and to explain fully why certain operating methods are followed. The audit will be far more effective if client personnel are willing to identify problem areas. This kind of two-way communication between the client and the auditors will be possible only if the client views the auditors as approachable, cordial individuals with a sincere interest in helping the client.
The auditors can be independent and objective without being cold and impersonal. They should never convey the impression that they regard the client's employees as potential embezzlers. Neither should they take over office equipment or accounting records in a manner that suggests lack of consideration for the convenience and status of the client's staff.
The development of social relationships with the client outside the office, as advocated by Ferrel, is helpful to the CPA partner as it is to the architect, the physician, the attorney, and members of other professions. The successful CPA will usually be an active community leader, well known in civic organizations, social clubs, educational circles, and many other related areas. The CPA not only attracts new clients but contributes to the advancement of the total environment in which the CPA's professional talents are employed.
The most difficult issue posed by Peters and Ferrel is whether the development of very close friendships between the CPA and staff on the one side and the client and staff on the other may cause the CPA to lose independence to some degree. This possibility cannot be easily dismissed. In assessing relationships with the client, the CPA must not only consider the fact of being independent, but also the recognition of independence by the public. The CPA must ask the question: Would an outsider having full knowledge of the relationships between the CPA and a client have doubts about the CPA's independence?
This hard-to-define narrow path between cordial CPA-client relations on the one hand and the threat of loss of public confidence in the CPA's independence on the other demands that the CPA exercise care and judgment in social relationships with clients. Partners, who by the very nature of their responsibilities must meet with business executives on their own ground, tend to develop social contacts with clients. Presumably, partners in a public accounting firm have demonstrated the maturity, judgment, and breadth of view that will enable them to maintain a proper balance between friendship with clients and professional independence.
When the element of sex enters the picture, the formulation of precise rules of conduct becomes more difficult, if not impossible. Assume, for example, that a female executive and part owner of a client company and a male partner of the company's public accounting firm are known to be constant companions during off business hours. The public would probably find it difficult to believe that the CPA would be truly independent in auditing the business in which his friend played such an important role.
What you need to do
-Rewrite the answer is your own words and paraphrase it. Because it is taken from solution
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