It is the end of an accounting year forJulietKravetz,controller of a medium sized, publicly held corporation specializing in toxic wastecleanup. within the corporation,only Kravetz and the president know that firm has been negotiating for several months to land a very large contract for wastecleanup in westerneurope.Thepresident has hired another firm change an hourly fee plus expenses, but has agreed not to submit a bill until the negotiations are in their final stage ( expected to occur in another three to four months) even if the contracts fallsthrought, the outside firm is entitled to received payment for its services. based upon her discussion with a member of the outside firm,Kravetzknowsthat its charge for services provided to date will be $150,000. this is material amount for the company.
Kravetz knows that the president wants the negotiations to remain as secret asposibble so that the competitors will not learn of the contract the company is pursuing ineurope. indeed, the president recently stated to her " this is not the time to reveal ouractionsin westerneurope to other staff members, our auditors, our readers of our financial statement: securing this contract is crucial to our future growth " no entry has been made in the accounting records for the cost of the contract negotiations.Kravetz now faces an uncomfortable situation. the company's outside auditors has just asked her if she knows of any year-end adjustment that have not yet been recorded.
Required :
What are the ethical considerations thatKravetz faces in answering the auditors question?Howshould she respond to the question.