You are an audit supervisor assigned to a new client, Go-Go Corporation, which is listed on the New York Stock Exchange. You visited Go-Go’s corporate headquarters
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| SOLUTION: Though you may not have specific information linking the corporate treasurer to the prior fraud, this information should indicate a need to examine carefully the corporation's human resource standards and personnel policies and practices with respect to hiring. c. Management explained its plans to change accounting methods for depreciation from the accelerated to the straight-line method. Management implied that if your firm does not concur with this change, Go-Go will employ other auditors. PROBLEM: Why would a company want to move from an accelerated depreciation method to one with a lower depreciation write-off? One reason is that it reduces depreciation expense, thereby increasing net income and, potentially, the company’s stock price. Alternatively, they maybe looking fora way to mask, or hide, other company problems that will affect net income. SOLUTION: The company should have a logical and defensible reason for changing accounting methods, other than just to increase net income and the stock price. The company maybe willing to go to great lengths to "get their own way" with respect to an important financial reporting matter. The commitment to ethics issue involves questionable practices, desire to make the numbers, etc. If management does not have a good reason for the desired change, company management’s commitment to integrity and ethical values should be carefully evaluated. It is also possible that there is a problem with management's philosophy and operating style. Management’s philosophy and operating style relates to risk- taking propensity and problems with philosophy and operating style are similar to carelessnessn or recklessness. It is important to note that management can be careless, yet ethical they can also be careful, yet unethical. db You learned that the financial vice president manages a staff of five internal Download 223.26 Kb. Share with your friends:
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