Liug

Page 1 of 5

Liug

By | Feb. 2011
Page 1 of 5
Auditing and Professional Ethics –ethical scenarios 3

Scenario 1:
Life Can Be Busy
How do you do your job—when you don’t have time?

The Situation
Susan York is an experienced partner in a regional CPA firm, whose largest audit client is a mental health provider, Health Plus. The president of the healthcare system, Dirk Eliot, was a good friend of hers from college. York admired Eliot greatly, because she was aware that, for humanitarian reasons, Eliot had given up a well-paid and prestigious job in order to take on the management of Health Plus.

Health Plus’s system relies heavily on Medicare reimbursements for its revenue. York, understanding the importance of these reimbursements to the vitality of this healthcare business, prudently would aim to review personally the Medicare reimbursement and claims documentation provided by the healthcare system, as part of the audit.

It was a June 30th audit. Health Plus’s financial statements had to be delivered to their primary creditor, a financial institution, by the end of the day on August 15th, or their fairly substantial loans could be put into default.

In past years, because of the nature of this critical part of the audit engagement—the evaluation of the propriety of the Medicare reimbursements—York would not get the client papers to review until around August 10th. Yet this was acceptable to her, since she was happy to put other work to the side in order to do this task for her friend, and four or five days would be sufficient time.

This year, however, on the 10th of August, York receives a call from her friend, who explains that a key person in the preparation of the papers has been ill for a week, and that he will therefore need a few extra days to get the papers to her. Eliot emphasizes once again how important this work is for his business, and York once again repeats how much she is committed to helping with this crucial part of the audit.

A couple of days later, Eliot calls...