ACC 546 Case 12.4 Surfer Dude Duds, Inc

 

[1] What are Scott’s options?

 

[2] How might a going-concern explanatory paragraph become a “self-fulfilling prophecy” for Surfer Dude?

 

[3] Discuss the importance of full and accurate auditor reporting to the public, and describe possible consequences for both parties if the going-concern explanatory paragraph and footnote are excluded. How might Scott convince George that a going-concern report is in the best interests of all parties involved?

 

[4] What potential implications arise for the accounting firm if they issue an unqualified report without the going-concern explanatory paragraph?

 

[5] What factors might motivate Scott to be objective in his decision, despite his personal concern for his friend?

 

[6] Is it appropriate for an audit partner to have a friendly personal relationship with a client? At what point could a personal relationship become an independence issue?

 

[7] In your opinion, what should Scott do? Briefly justify your position and explain how you would approach George on Monday.

 

PROFESSIONAL JUDGMENT QUESTIONS

It is recommended that you read the Professional Judgment Introduction found at the beginning of this book prior to responding to the following questions.

 

[8] How is professional skepticism related to professional judgment? Describe a few factors that might be clouding Scott’s professional skepticism.

 

[9] Consider the judgment trap of solving the wrong problem. What are some problems that Scott is trying to solve? What is the problem he should be trying to solve? Describe how he might reconcile the two objectives so that the problem becomes simpler to resolve?

 

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