CASE 5.4
WAVERLY HOLLAND, AUDIT SENIOR
Synopsis
Waverly “Dutch” Holland spent three years on the auditing staff of a major accounting firm
before leaving to pursue an MBA degree. Dutch’s ultimate career goal was to work in Colorado’s
ski “industry.” During his first semester of graduate school, Dutch received an unexpected phone
call from Robert Chope, an attorney. Chope’s firm was preparing to file a large class-action
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Waverly Holland, Audit Senior—Key Facts
Case 5.4 Waverly Holland, Audit Senior 231
1. Dutch Holland’s career objective was to be involved in the management of a ski resort.
2. Dutch chose accounting as his college major because a ski resort manager had convinced him
that a thorough knowledge of accounting would be very helpful in managing a business.
3. Dutch’s career plan included spending a few years on the auditing staff of a major accounting
5. During his tenure on that engagement, Padova & Vicenza’s management had made increasingly
6. After leaving public accounting and enrolling in an MBA program, Dutch was contacted by an
7. The lawsuit would allege that Padova & Vicenza had intentionally and materially
8. Chope supposedly wanted Dutch to meet with him to clarify certain unresolved issues before the
lawsuit was filed.
9. Dutch did not want to become involved in the lawsuit but after being pressured by Chope he
11. Morris told Dutch that he would face serious retribution from his firm, Dutch’s former
employer, if he chose to cooperate with Chope.
Instructional Objectives
232 Case 5.4 Waverly Holland, Audit Senior
1. To examine a major concern of independent auditors, namely, exposure to significant legal
liability.
Suggestions for Use
Litigation is a major problem, if not the most important economic problem, facing the large
international accounting firms that dominate the profession. Often overlooked is the impact that
litigation can have on the “foot soldiers” of the profession, that is, the staff auditors and audit seniors
1. As mentioned in the “Suggestions for Use,” the character known as Dutch in this case chose not
to meet with the plaintiff attorney. Again, although “Dutch” spent months fretting over that
2. Client confidentiality is a major ethical issue in this case. If Dutch agrees to meet with Chope,
he faces some risk of revealing information confidential to Padova & Vicenza. Although he is no
Case 5.4 Waverly Holland, Audit Senior 233
release any confidential information regarding Padova & Vicenza without the company’s prior
approval.
One or more of your students may suggest that Dutch has an ethical responsibility to be “loyal”
to his former client and former colleagues. “Loyalty” is not among the ethical principles included in
the AICPA Code of Professional Conduct. However, one could argue that loyalty could be
subsumed in the “integrity” principle. ET 54.03 notes that “Integrity is measured in terms of what is
right and just.” The following paragraph of that ET section observes that when faced with difficult
3. I believe it is important to continually remind students that when evaluating the behavior of an
auditor (or anyone else for that matter) involved in a difficult situation, they must attempt to put