Cardillo Case

Topics: Audit, Auditing, Accountant Pages: 4 (1140 words) Published: September 24, 2011
Darrell Gudenau
Linda Campbell
Cardillo Travel Services Case
1. The first person that faced an ethical dilemma was the former controller of Cardillo Russell Smith. Although he is not an accountant, he still had to make an ethical decision on whether to sign off on the transaction. He was called into the chairman’s office to be persuaded to sign the affidavit but he didn’t budge. Smith knew that recognizing the payment as revenue would be improper. The first accountant that faced an ethical dilemma was Helen Shepherd who was the audit partner overseeing Touche Ross. They found the same dilemma in the entry that Smith would not sign off on. Shepherd first discussed the entry with her subordinates before she questioned Lawrence, controller of day to day operations. Shepherd, still uneasy about the transaction, got confirmation to contact United Airlines about certain features of the agreement. Shepherd found that the two sides had different opinions about the transaction in which she concluded that the entry should be adjusted and could not be recognized as revenue. Shortly after Shepherd demanded the correct adjustment to be made, she got a call explaining that her audit firm was terminated. One of the parties potentially affected by the outcome is the CPA firm and its other clients. They have a right to expect its professionals to follow the professional standards and that’s just what they did. The public accounting profession is also affected by this outcome as they expect all of its members to uphold the Code of Professional Conduct. The rights here that were not upheld were that the clients confidential information was not upheld as Touche Ross filed an 8K statement containing that information. However, the SEC requires them to file the statement about any disagreements they had with Cardillo. The accounting profession might have lost some trust as they leaked information but it was with good ethical conduct. The next accountant...
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