Reference no: EM132738098

Question: 1. Assume that your audit manager arrives in the office early the next morning and sees the CFEF audit ready for review. She reads your review notes first, including those documenting your discussions with the CFEF Executive Director and with the NEF audit partner. She is shocked to see such differences of opinion on a major accounting issue. She quickly understands the CFEF Executive Director's position of wanting to "save" the $5,000,000 bequest until the next budget year. But she wonders and worries about the NEF audit partner's agreement with your client's management's position. After all, he is a well-respected partner at L&M and among the TUSAG firms and is widely reputed to have expertise in the not-for-profit area. She calls the audit partner, who just returned back to your office, to schedule a conference and invites you to join the discussion. After thoroughly reviewing the matter, both the audit manager and audit partner agree with your position. At this point, what of the following is the most attractive options available to K&B relative to the CFEF audit?

a. Persuade client management at CFEF, including the executive director, to recognize a $5,000,000 current asset called "contributions receivable" as well as an equal amount of revenue via an account "support from contributions."

b. Draft an adverse audit opinion report for presentation to the CFEF management and audit committee.

c. Withdraw from the engagement and let CFEF try to dig themselves out the hole that they've dug themselves into. It's their problem, not you or your audit firm's problem.

d. Report these patently illegal activities of the CFEF executive director to local and state authorities.