Accounting Chapter 7 Homework Given The Nature This Case Typically Present

Case 7.7

ELIZABETH WALLACE, AUDIT SENIOR

Synopsis

This case focuses on one workday in the life of three auditors, with a particular focus on

Elizabeth Wallace, an audit senior for one of the major international accounting firms. Elizabeth is

currently supervising the field work on the annual audit of Burnham Manufacturing, an auto parts

manufacturer. Her principal subordinate on the engagement is Anton Nikolov, who has just been

promoted to senior. Anton assists Elizabeth in supervising the four staff accountants assigned to the

Burnham audit and is responsible for certain administrative tasks, such as filing the weekly progress

reports with Julius Shen, the audit engagement partner.

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Case 7.7 Elizabeth Wallace, Audit Senior

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Elizabeth Wallace, Audit Senior—Key Facts

1. Elizabeth Wallace, a “heavy” audit senior with a major accounting firm, is supervising the

fieldwork on the annual audit of Burnham Manufacturing, an auto parts manufacturer.

4. Elizabeth’s addiction has also apparently induced some level of paranoia.

5. After suffering through several weeks of mistreatment by Elizabeth, Anton decided to meet with

Julius Shen to complain about her abusive management style and erratic behavior.

Case 7.7 Elizabeth Wallace, Audit Senior

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Instructional Objectives

1. To demonstrate that the public accounting profession is a microcosm of society and that social

problems that affect society also affect the members of the profession.

Suggestions for Use

This case is best suited for a graduate auditing course because it addresses a sensitive topic that

you may not feel comfortable discussing with “typical” undergraduate students. In fact, you may not

feel comfortable covering this case in a graduate auditing course. Having said that, my view is that

students will be encountering a wide range of challenges when they enter public accounting and that

Suggested Solutions to Case Questions

1. Given Elizabeth Wallace’s behavior, that is, her obvious mistreatment of her subordinates, I

believe that Anton was well within his rights to take this matter directly to the audit engagement

2. First, let me address the second part of this question, namely, what factors should Julius

consider before deciding how to proceed? These factors include the improper (hostile) work

environment that Elizabeth is creating for her subordinates, the negative impact of her behavior on

the performance of the Burnham audit, and her desperate need for help in dealing with an apparently

significant drug addiction.

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3. As a sidebar, I have found that partners of major accounting firms are generally not comfortable

discussing this issue, that is, substance abuse by their subordinates—which, I suppose, is not

surprising. According to my informal research, two major firms require their employees to sign an

agreement that requires them to submit to random drug tests. However, these firms apparently only

require employees to submit to drug tests if there is some reason to suspect that they are abusing

drugs. Failing a drug test is grounds for immediate termination. However, each firm apparently will

reconsider if the employee immediately seeks treatment in an approved rehabilitation program.