Professional Skepticism

Professional Skepticism

SUMMARY

Will recently decided to change careers and become a CPA. After successfully completing the CPA Exam he has been working with a regional audit firm. His latest assignment, also his first engagement on his own, is an audit engagement of a small town called Rosedale. He is somewhat concerned about completing the audit on his own but has a reliable mentor, Vince, at his firm who is willing to provide help and advice to Will. Will has informed Vince that his contact with the town of Rosedale is Jessica. Jessica happens to be the wife of Will's long time best friend. Vince has advised Will that this is not a problem; in fact he has told Will that this should help him be more comfortable with his engagement. Vince has told Will that his main concern with the engagement is not any violation of independence but rather time management. He advised Will that the firm has audited the town for the last four years without any problems and that although controls could be tighter, he should remember that the client has limited resources and therefore will not be perfect.

ISSUES

As part of the audit program Will has to conduct some routine tracing of revenue. He has learned from his previous audits that there is a pattern of a few transactions that require further investigation but that the appropriate documents always turn up and there are no real issues. He is thinking about this pattern when he arrives at the audit procedure "Select, at random, a sample of 20 traffic tickets marked as paid per the receipt book for misdemeanor traffic violations. Trace to sheriff's computerized records as being paid, to bank deposit slips, and to bank statements." As he traces the tickets he finds one marked as paid in cash in the payment records with no corresponding deposit or bank statement record. Will thinks to himself that this is likely another instance of an innocent mistake as he has encountered previously.

Rather than spend any more time investigating the missing cash he takes the issue to his friend Jessica to ask for possible explanations. She explains that the deposit was prepared but fell between two cabinets overnight and was not missed the next morning. The explanation seemed to make sense; after all there were not many cash payments made and it would be easy for the other clerk to have overlooked it. Jessica gave Will the deposit envelope and cash so he could match it with the sheriff's record book. The money was all there and the entry in the book for that date agreed with the deposit slip. However as will reconciled the entries he noticed that the entry in the book was in black ink while the envelope was filled out in blue ink, even though they should have been completed at the same time. He also noticed that the bills seemed "sticky" as