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Chapter 17 - Solution Manual

Unknown deleted 360 the opposing view that market

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360 The opposing view that market forces cannot be relied on to produce information is a critical perspective viewpoint. Individuals taking this position point to various failures in our system such as the saving and loan crisis and audit failures as evidence that the system is not working. They maintain that various individuals and groups have the ability to influence standard setting. They maintain that large corporations have pressured standard setters to protect their own interests. It should be noted that both viewpoints come to the same conclusion but differ in their approaches to solving what they see is the problem. The marginalists favor a completely free market with no rules; whereas, the critical perspectivists favor government intervention into the standard setting process. Case 17-2. The following is one solution. Students may find other issues. a. It is not ethical for Barbara to work hours and not charge them to the client. This is a violation of the firm's employment policy that could cause her to be dismissed. This practice could also cause problems is subsequent years when the amount of hours necessary to complete the Lakes Brothers audit in compared to the current year. b. 1. Obtain the relevant facts. - Barbara Montgomery is being pressured to work hours on the Lakes Brothers audit "off-the-clock." 2. This practice is against her auditing firm’s employment policy, a violation that could cause her to be dismissed. This practice could also cause problems in subsequent years when the amount of hours necessary to complete the Lakes Brothers audit is compared to the current year. 3. The individuals affected by this decision are Barbara, Robert Cooley her supervisor, the partner in charge of the job, the accounting firm Coopers and Rose, subsequent years' audit teams and the client Lakes Brothers. 4. Possible alternative solutions: a. work "off-the-clock" b. Refuse to work "off-the-clock" c. Report the situation to the partner in charge of the audit d. Report the situation to a mentor or an ombudsman within the firm and ask for advice. 5. Possible outcomes of alternative solutions: i. Barbara will be seen as a team player by her immediate colleague. Robert Cooley will be assisted in bringing the job in at or under Budgeted hours. The partner in charge will be mislead about the hours necessary to actually complete the job. The firm and the client will also be mislead as to the actual hours necessary to complete the job ii. Barbara will not be viewed as a team player. Cooley will probably give her an unfavorable review; and he will be less likely to buy the job in under budget. The partner in charge will be informed about the hours necessary to complete the job but may be faulted by others in the firm for failing to buy the job at budget. However, the original situation may not be exposed. The firm and the client will be unhappy because Unknown Deleted: Unknown Deleted: Unknown Deleted: Unknown Deleted:
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361 the job has not been completed within budged hours; however, they will be informed of the time necessary to actually complete the job.
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