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ACC 562 Week 7 Assignment 2 Cardillo Travel Systems, Inc(8 pages word paper)
RUNNING HEAD: CARDILLO TRAVEL SYSTEMS, INC.
CARDILLO TRAVEL SYSTEMS INC.
ACCOUNTING 562 – ADVANCE AUDITING
CARDILLO TRAVEL SYSTEMS, INC
Individuals in the accounting profession have a responsibility to the general public. For
the public to rely on the information providedthere must be a level of confidence in the
knowledge and behavior of accountants and auditors. Ethical behavior is necessary in their
profession to prevent fraudulent activities and to gain public trust.Ethical principles could
potentially be threatened by a broad range of circumstances including self-interest, advocacy,
familiarity, and intimidation. A rigorous Code of Professional Conduct requires they act with
integrity, objectivity, due care, competence, and serve the public interest when providing
financial services (www.aicpa.org, 2016),
In the case of Cardillo Travel Systems, Inc., a controller and two audit partners
encountered ethical dilemmas with the company. The CEO frantically needed to increase the
stockholder’s equity of the company to fulfill a court order issued in a civil lawsuit filed against
the company. To achieve this task, the CEO attempted to pressure and manipulate the controller
and two audit partners to accept afraudulent journal entry that would considerably increase the
equity of the company. However, the controller and the audit partners repelled the CEO’s
advances to sway their professional decision (Knapp, M.C., 2012).
Explain the Securities and Exchange Commission's rationale to charge Cardillo executives
with each of the following violations:
Making false representations to outside auditors
Cardillo executives made incorrect accounting transactions and attempted to mislead
external auditors. The Securities and Exchange Commission (SEC) had the right to charge them
for misrepresentation and providing deceptive information to the external auditors as well as
attempting to cover that which should have been made known. This was against the SEC
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