Tabletop External Auditors are currently completing the audit of Star Enterprises, Inc. a manufacturer of specialized astronomy and
stargazing equipment with sales throughout the continental United States. In a recent meeting with Star Enterprises' top
management, a difference of opinion was noted on the depreciation method Star Enterprises has been using for its factory equipment;
currently the straight line method. Tabletop auditors convened a private meeting to include just the audit managers assigned to the
audit to discuss this issue further. During this meeting, it came to light that three of the audit managers believe straight line
depreciation is the most appropriate method and the other three audit managers believe double declining balance is more
appropriate. The lead partner assigned to the engagement has been called in to settle the difference of opinion. Which of the choices
below most accurately reflect the lead partner's decision process in arriving at the suitable method?
O Per the AICPA Code of Professional Conduct, the lead partner is likely to take the concerns directly to the client's board of
directors and request the issue be voted on and decided at the next board meeting.
O The lead partner assigned to the engagement is likely to attempt to determine if the straight line method of depreciation is
causing a material misstatement in the financial statements, and if so, request it be changed to the double declining balance
method to avoid future misstatements.
O The lead partner assigned to the engagement is likely to advise all senior managers that choice of depreciation method is
ultimately the clients to make, and thus the audit staff should simply audit the depreciation expenses to make sure they are
correct.
O If both depreciation methods are not likely to cause a potentially material misstatement in the financial statements, the lead
partner will likely advise the audit managers to defer the decision to client management.
