Question 1

No, it would not have been appropriate for Avis to substitute another store for store 51. When an auditor has already selected a sample for testing, he/she should not deviate from the selected sample just because the results did not look appealing to them. Once a suitable audit procedure has been selected it ought to be applied to all the samples available. Failure to report on the cutoff errors would have been unethical. The reasons that would have driven Avis to exclude store 51 in her sample were personal. As a result, working on this notion would work to compromise the auditor’s independence.

Question 2

The parties that have the potential of being affected by the ethical dilemma facing Avis Love include Mo Rappele (store manager), the firm and Avis. Avis had an obligation towards the firm and its top level officials. Avis had the obligation of being honest and objective while conducting his duties to report the actual state of affairs. If she failed to include the cutoff error from store 51, the store manager would not have been caught, and the probability is that the fraud would continue. Avis owed an obligation to herself of being transparent and honest with her employers. Omitting store 51 would have resulted in her losing her self-respect and that of her professional certification. Avis did not have any obligation towards the store manager.

Question 3

The AICAP’s professional code of conduct does not include any clause prohibiting the development of friendships with the personnel of the client. To some extent, it seems even impossible to avoid having friendships. When an auditor has been involved with a client for a long time, the probability of developing relations is high. The relationships even make it easier for the staff to avail the relevant information for the auditor to conduct their work. However, the code of conduct does outline some guidelines that make it clear for an auditor on ways that would make them violate their independence. As a result, it is advisable for professionals to read the relevant regulations to help understand what is expected of them and what they ought to avoid.

Question 4

Year-end cash receipts and sales cutoff tests audit are usually conducted with the objective of ensuring that sales are recorded in the actual periods that they occurred. The key auditing objective here is occurrence. This works to ensure that the sales occurred during that exact period that has been indicated. This ensures there are no errors or intentional fraud instances in the books.

Question 5

In deciding whether the cutoff errors that were discovered were material to Lowell’s financials, Avis would have used her judgment as an auditor to determine the materiality. The cutoff errors involved were as a result of fraud perpetuated by the store manager hence making the errors material. Avis was only viewing the issue from the percentage of the firm’s financials that the money presented.  Using a quantitative analysis, in this case, would have been wrong. What if every store had similar errors and were overlooked? The numbers would end up being high.

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