Qualify or Not?

Acc/260
November 3, 2013

Qualify or Not?
Viccio and Martin staff accountant Jane Ashley was assigned to work on an audit team with one senior auditor Frankie Small. The audit they were to perform was on the top paying client of Viccio and Martin, Models Inc.. Jane had spent time working for the firm while finishing her academics, and had been present for many other audits. This left her excited to show her employer all she had learned during this first assignment. Jane was away at school when the yearend inventory count was made for Models Inc., so she decided to brush up before the audit began by studying the financials, audit notes, previous audits, and the inventory counts performed. Upon doing so, …show more content…

The five-question approach could be used as well in conjunction because one of those questions is the decision legal. In this case, the misrepresentations in the financial statements are not legal and demand reporting. There are counterarguments that the impact on some of the stakeholders concerned could be very negatively impacted; however, those arguments lose out to the laws in place.
The stakeholder impact of the decision to report the misrepresentation will differ tremendously. The bank will likely call the loan; this will save them from possible default down the road by the company if the profits continue to decline. The impact on the suppliers is much the same, they would likely choose not to extend any further credit and instead demand C.O.D. for their goods delivered. This will save them from future losses in their own revenue resulting from uncollectable accounts, and a faster turnover on accounts receivables. The impact on the Models Inc. would likely not be favorable as the financial burden of repaying the loan cost them their existence. The company could also face fines and other penalties as seen fit by the governing body. The employees would also lose out, because they would be unemployed if the company goes bankrupt or out of business. This could also have a trickledown effect on the economy and the community. There would a negative impact on