You are an audit supervisor assigned to a new client, Go-Go Corporation, which is listed on the New York Stock Exchange. You visited Go-Go’s corporate headquarters to become acquainted with key personnel and to conduct a preliminary review of the company’s accounting policies, controls, and systems. During this visit, the following events occurred:
• You met with Go-Go’s audit committee, which consists of the corporate controller, treasurer, financial vice president, and budget director.
• You recognized the treasurer as a former aide to Ernie Eggers, who was convicted of fraud several years ago.
• Management explained its plans to change accounting methods for depreciation from the accelerated to the straight-line method. Management implied that if your firm does not concur with this change, Go-Go will employ other auditors.