Resolving Difficult Accounting Issues: A Case Study in Client‐Auditor Interaction

This case requires you to consider the complexities of auditing in terms of a realistic client‐auditor interaction involving difficult accounting issues. The case is loosely based on an actual situation that occurred between an audit firm and its client. In the case you will assume the role of either the auditor or the client as you attempt to resolve inventory and accounts receivable valuation issues for which there are no “clear‐cut” solutions. This case includes three sections. First, you will read an article containing an auditor‐independence risk framework to help you understand how client‐auditor interactions relate to auditor independence risk. Second, you will develop alternative solutions to the inventory and accounts receivable valuation issues in your respective auditor or client group. Third, you will interact with another group assuming the opposite role and you will resolve the valuation issues in some way. By completing the case, you will learn about client‐auditor relationship/interaction issues, client‐auditor economic incentives, and auditor independence risk issues.