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University of the People BUS 5115 Business Law, Ethics and Social Responsibility Term 4, 2018-2019 Written Assignment Unit 2 Instructor Jennifer Schneider
In this written assignment we will review the case study of the conflicting clients, confidentiality issues and the misinterpretation of facts. In our case study the engagement manager Jennifer Grace was reviewing the current-year audit working papers of Coshocton National Bank (CNB). In the working papers related to loan valuation, Jennifer saw that the commercial loan of Fantastic Developments had been randomly selected for confirmation but that Fantastic had not responded to either the initial or second confirmation request. The audit staff disposed of this “loose end” by alternate procedures: examining cash collections (which had become somewhat sporadic) and vouching to underlying loan documentation, including a set of recent (unaudited) financial statements that showed Fantastic’s solid financial position and operating profitability. Fantastic Developments was also the client of her firm, it was a private company and last year Jennifer had served as the audit senior on the prior-year audit of Fantastic. She knew that the company had been struggling for a couple of years and had experienced recurring operating losses. Her knowledge of Fantastic did not reconcile with the discussion in the audit working papers related to the financial statements furnished to the bank. Jennifer noted this reference to Fantastic Developments but the CFO of the Fantastic Tom Ward didn`t give her the answer to her question about the papers. Tom replied that business had picked up. He apologized for not calling Jennifer’s firm himself because he had been so busy, and then he told her that Fantastic had decided to engage another CPA firm for its accounting and auditing needs. Jennifer was confused and wondered whether the financial statements which Fantastic furnished to the bank as a basis for a loan application are fraudulent but the bank apparently has no such suspicion.