Case: Bill DeBurger, In-Charge Accountant

Analyzed by:
Tatag Adi Sasono
Lucky Firdaus Ivan Ansori
Big Picture

Bill DeBurger is an in-charge accountant who has an 18-month experience with his
employees in a large national accounting firm. The Bill Company uses an "in-charge" position
for employee positions among accountant staff and senior auditors. Other positions used by
accounting firms for this position are "senior staff" and "semi-senior."
When Bill tries to decipher the scrap of supplies, he gradually acknowledges to himself
that he does not know whether Marcelle's inventory value is accurate materially. Work papers
that summarize individual errors found in inventory accounts reflect a net worth of only $
72,000. The amount is immaterial even referring to Marcelle's unusually small net profit.
However, Bill realized that the $ 72,000 figure was slightly better than expected. The stock of
obsolete client inventory is especially at issue with Bill.
He had heard rumors that Marcelle had intended to stop 2 of the 14 sales departments
in his store. If that is true, the inventory in the department should be sold at a substantial
discount. The dollar value collected from the two-department inventory is close to $ 6 million,
while the obsolete client inventory reserves have end-of-year balances of only $ 225,000.
Earlier, in an audit, Bill had asked Sam about the closure of the two reported departments. The
partner has simply said "Do not worry about it."
From the case above, what Bill did was the biggest mistake made in his position as an
"in-charge accountant". First, Bill as an in-charge accountant has no authority to audit but has
done an audit. Both Bill had realized his mistake but still made the mistake of pressure. In terms
of ethics Bill has violated the integrity of an accountant. The professional attitude that should
be upheld dropped his position in a low place. Bill is not firm and dishonest to himself in a
professional relationship with Sam in carrying out his work. As an accountant, Bill should have
a principle of integrity, objectivity and responsibility that do not impose the dignity of the
profession.
Sam was unprofessional for ignoring the truth that Bill had made. Sam lacks integrity
and does not objectively evaluate inventory because there are hidden for the sake of giving
qualified opinions. Bill's statement not to sign the paperwork was correct but since Sam was
Bill's superiors, the fraud was unavoidable by Bill. An auditor should be experienced as
required in a professional code of ethics that has high-flying hours and has followed continuing
education continuously. An auditor should update his or her expertise and experience at any
time as evidenced by the training certificate.
In this case the audit is submitted to Bill who is not an auditor and forced to become an
auditor. Although Bill is an accountant and an experienced but competent person, Bill never
updates his knowledge and skills on an ongoing basis and does not have a CPA certificate.
 Case: Bill DeBurger, In-Charge Accountant
Analyzed by:
Tatag Adi Sasono
Lucky Firdaus Ivan Ansori

1. What conclusion do you believe Bill DeBurger reached in his inventory memo? Put
yourself in his position. What conclusion would you have expressed in the inventory
memo? Why?
The employee should have completed the inventory memo. Unless the employee could
articulate why the $72,000 overstatement on a $50 million inventory amount might be
symptomatic of a larger concern, it seems reasonable that the employee could sign off on the
valuation inventory.
The employee had expressed his concerns about the potential department closures to
his supervisors, but it is not clear to whether the employee or his supervisor was obligated to
investigate the rumor as it might cause a material misstatement in the financial statement.
Afterwards, we think Bill can still make a sign-off because the misstatement of
inventory Bill found is immaterial. This is in accordance with SA 200 “Overall Objectives of
the Independent Auditor and the Conduct of an Audit in Accordance with Standards on
Auditing” in performing an audit of the financial statements, the overall objectives of the
auditor including “(a) Obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, thereby enabling the
auditor to express an opinion on whether the financial statements are presented fairly, in all material
respects, in accordance with an applicable financial reporting framework."
Based on the above quote, the auditor's responsibilities and objectives are based on the
degree of materiality of an account. If Bill had gained enough confidence, then Bill should not
have to worry and spend a lot of time convincing him of the accuracy of the value of the
inventory, since the error was known to be immaterial. If Bill considers the procedures that
have been executed to reduce the risk of errors in the inventory account less convincing, Bill
can perform additional procedures to increase confidence to get a conclusion on the value of
inventory (sign-off).

2. Would you have dealt with your uncertainty regarding the inventory account differently
than Bill did? For example, would you have used a different approach to raise the
subject with Sam Hakes?
Yes, we would use a different approach to raise the subject with Sam Hakes. Bill’s
action is too straight to us. we would like to have a conversation with Sam and tell him that we
are not comfortable writing a conclusion for Marcelle Store and also tell him why we think so.
Since Sam has lots of audit experiences, Sam might be able to give us some good hints what
to do.
We may take other approaches to deliver and follow up on misstatements in inventory
even though their value is considered not too material by evaluating the impact of misstatement
of uncorrected inventory accounts through the determination and reassessment of specified
materiality to confirm whether the materiality is still appropriate. In order to carry out such
evaluation, the Bill shall refer to the procedures in accordance with the standard audit 450
“Evaluation of Misstatements Identified during the Audit” the Par-11 Audit as follows: “The
auditor shall determine whether the errors of the non-corrected presentation are material,
individually or in aggregation. In making this determination, the auditor should consider:
(a) The size and nature of the misstatement either in relation to the class of transactions,
account balances, or specific disclosures and financial statements as a whole, and the
particular circumstances of the misrepresentation; and
(b) The effect of uncorrected misstatement related to prior periods on the relevant
classes of transactions, account balances, or disclosures and the financial statements as a
whole.”
Bill in preparing an inventory memo containing non-corrected misstatements shall be
furnished with sufficient appropriate audit evidence in accordance with standard audit of audit
evidence, which relates to the following inventory issues:
1. Obsolescence of supplies,
2. Incorrect inventory value,
3. Plan for closure of two departments.
The Bill shall document the results of misstatements of inventory and other supporting
evidence in the paper in accordance with standard audit of audit documentation and state these
findings and issues in the management letter.

3. Evaluate Sam Hakes’ response to Bill’s statement that he was unable to sign off on the
inventory account. In your view, did Sam deal with the situation appropriately? Was
Sam’s approach “professional”? Explain.
Sam has given the program audits and set as many as 900 hours of time that is felt
enough to finish the inventory account. If the audit program created was in accordance with
the provisions, but Bill actually stated that he was not able to sign-off, it makes Bill shows
unprofessional attitude. Because with a clear program audit of the steps taken, Bill as an in-
charge auditor was responsible for the account to come to conclusion.
On the other hand, Sam also made a mistake of ignoring the standard audit of auditors
should plan the nature, timing, and extent of direction and supervision of team members and
review of their work. It is stated that Sam should have supervised Bill. However, in this case,
Sam seemed to be showing a too relaxed attitude by ignoring Bill's request for discussion.
We think Sam’s approach is not “professional” enough in this case. We think Sam is
lack of patient here. When Bill told him that he is not going to sign off the audit, he should
have realized that Bill have something to say. If we were Sam, we would spend a few minutes
to have a conversation with Bill, figure out what’s going on. Sam should know that Bill’s
performance directly affecting the company as well. Sam, as a company partner should think
about this issue deeper.
 4. Is it appropriate for relatively inexperienced auditors to be assigned the primary
responsibility for such critical accounts as Marcelle Stores’ inventory? Explain.
In our opinion, we think it is inappropriate for relatively inexperienced auditors to be
assigned the primary responsibility for such critical accounts as Marcelle Stores’ inventory.
Inexperienced auditors might give out unfair opinion for their audit. It is not only bad for the
clients, but also the financial report users. It also bad for the reputation of the audit company,
if public later find out that the company gives out unfair audits.
Based on the audit standard of planning an audit of financial statements which states in
establishing the overall audit strategy, the auditor shall “(a) Identify the characteristics of the
engagement that define the characteristics of the engagement that define its scope; (b) ensuring
the reporting objectives of the engagement to plan the audit time and the nature of the required
communications; (c) Taking into account the factors which, in the professional judgment of the
auditor, are significant in directing the engagement team's efforts; (d) Considering the outcome
of the engagement's initial activity and, where relevant, whether the knowledge gained from
other engagements that the engagement partner has engaged is relevant for the entity to be
audited; and (e) Ensure the nature, timing, and extent of resources necessary to carry out the
engagement.”
From that, it is not appropriate for relatively inexperienced auditors to be assigned the
primary responsibility for such critical accounts as Marcelle Stores’ inventory because do not
have nearly enough experience to be making such important judgment calls. Since auditing is
based heavily on auditor judgment, allowing inexperienced auditors to make sure critical
decisions could lead to a poor-quality audit. This can result in legal discrepancies if the
conclusion is incorrect.