Before Work You Need to Be Honest
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When dealing with the decision to take on work we must first know that we have the ability to do so. We should not say yes to a job before we have full confidence that we can complete it. There are times when we might need to ask questions but as long as there is an individual who will have the answers, we would most likely take on the job. In this case, the primary auditor that has the appropriate knowledge in the field of telecommunications is not in the picture. This would be the person that we would want to ask questions if we would run into an issue during the audit. I would like to base my decision on whether or not I would accept this audit on three things: honesty, care, and correctness. These are three standards or principles of accounting and can also be considered the foundations of liability according to Goldberg and Kelly Jr (1967). When honesty would be taken as a liability, it would be considered deceit.
The duty of care would be negligent misrepresentation. The duty of correctness would be strict liability. (Goldberg & Kelly Jr, 1967) Deceit would be essentially the same as fraud. It is the intentional misrepresentation of information. Most fraud cases would be considered material because the intentional misrepresentation would cause external users of the information to change their decisions based on the misrepresented information. According to Goldberg and Kelly Jr (1967), the modern rule that was developed through the judge’s decision over the deceit issue in the Ultramares case relied heavily on foreseeability. This means that the accountant at fault is liable to the people who he or she would have reasonably foreseen to have been injured by the misrepresentation.
Many times, these people would be external users such as creditors and investors. This allows for limited liability whereas earlier in the Peel v Gurney case it allowed for limitless liability against the deceitful accountant (Goldberg & Kelly Jr, 1967). States have not adopted specific liability standards and rules for accountants because of the large variety of cases. Each state has general laws but the “judiciary is usually responsible for the final determination” (Paschall, 1988). Depending on the level of deceit, the results of this liability could land the accountant in jail. However, the issue of honesty in this case would not be a determinant in my decision to take on this audit because I would not plan to be intentionally deceitful. Care as a liability would be negligent misrepresentation.
This is similar to deceit in the way that there could be material misstatements in the information but it is different than deceit so that negligent misrepresentation is not intentional. Goldberg and Kelly Jr (1967) said that many legal writers have concluded that accountants, if negligent, should be liable to certain third persons injured as a result of their negligence. Nevertheless, no appellate court decision, English or American, has ever held an accountant liable to a third person for negligent misrepresentation. As accountants we have a duty to care and this can relate to many things. We should care about the users who will be making decisions on our audit outcome and we should also care about the quality of work that we produce. Negligent misrepresentation would be the main determinant in my decision to take on the audit of the telecommunications company.
I know that I do not hold the level of expertise in the telecommunications industry that I would normally feel comfortable with when being engaged in an attestation engagement. I am extremely confident in my abilities related to retail public companies and non-profit charitable organizations because I have been auditing companies in those industries for 10 years. My manager notified me that the accounting software of the company she wishing me to audit is outdated and likely to be unreliable. Accounting software for retail companies and non-profit charitable organizations will be much different compared to IT companies and companies in the telecommunications industry. I know that if I take on this audit it would include that I basically teach myself about the entire accounting norms for the telecommunications industry.
I know that there is an extremely high risk for me to make a mistake without knowing that I did so if I take on this audit. Lastly, I will look at the duty of correctness, or strict liability. Strict liability is easily defined when talking about product liability but “no court has attempted to analogize strict liability for false representations in the products area to the area of service contracts” (Goldberg & Kelly Jr, 1967). When a company provides a service, the user(s) are expecting not a properly working product but the professional’s practical experience and knowledge. This experience and knowledge is hoped to provide for the desired result of the user(s). As accountants we are engaged to perform services because we have expertise in areas that others don’t. In my case, I specialize in the engagement of audits for retail public companies and non-profit charitable organizations. Once again, I do not have the proper expertise in the IT or telecommunications industries.
The client will expect me to have working knowledge of such industries when in reality I do not hold true to that. This will be a determining factor in whether or not I would want to take on the audit that my manager asked me to. My final decision would be to not take on this audit of the telecommunications client. I feel that based on the standards of honesty, care, and correctness I would only be able to uphold the duty of honesty to both the client and any related third-parties. I would not be able to perform the audit with due care because I know that there would be a very high risk that I would make mistakes during the audit. I also know that I would not be able to fully perform this audit with the level of correctness that would be expected of me as an accountant. I want to be a reliable auditor and I would not feel comfortable taking on this audit because I know that I would not even fully be able to rely on my own work.