Accounting 101Essay Homework: Beyond the Numbers 1-3

In the scenario given for this problem, the parties potentially affected by this audit and the fee plan proposed are the management for Allnet Company, Craig Thorne, as well as Craig Thorne’s public accounting firm. Since ethics is are accepted standards that determine good or bad behavior, there is a few ethical factors here that needs to be taken into consideration. According to the textbook “the preferred path is a course of action that avoids casting doubt on one’s decision”. In this scenario, Allnet’s management suggested that the fee range for Craig Thorne’s audit services of their financial statement be dependent on the reported profit of their company. This should immediately throw a red flag for Craig Thorne and his public accounting firm because his audit findings would less likely be trusted since his pay as an auditor have a direct correlation with the client’s success. All three components that composes the Fraud Triangle presents itself in this proposition. An Opportunity to commit fraud, possible Pressure or incentive to commit fraud because of the suggested fee arrangement, and Rationalization or attitude might surface into Craig Thorne’s mind and his judgment for the criminal nature of this act might be clouded due to false visions of affluence. With all of the above factors being said, I would not recommend Mr. Thorne to accept this audit fee arrangement because there is just too much temptation for him to possibly start cooking the books. The fee arrangement needs not be connected to how the financial statements turn out, but instead a fixed amount should be agreed upon by both parties (Allnet Company and Craig Thorne’s public accounting firm). Ethics should always be considered in accounting because money is the root of most evil and accounting does revolve completely around all