(BQ) Part 1 contents "Contemporary auditing - Real issues and cases" has contents: Ethical responsibilities of independent auditors, professional roles, professional issues, international cases. | Find more at SECTION 5 ETHICAL RESPONSIBILITIES of INDEPENDENT AUDITORS Case Cardillo Travel Systems, Inc. Case American International Group, Inc. Case The North Face, Inc. Case Waverly Holland, Audit Senior Case Phillips Petroleum Company Case American Fuel & Supply, Inc. 5 Find more at This page intentionally left blank Find more at CASE Cardillo Travel Systems, Inc. If virtue is not its own reward, I don’t know any other stipend attached to it. Lord Byron Act 1 Russell Smith knew why he had been summoned to the office of A. Walter Rognlien, the 74‑year‑old chairman of the board and chief executive officer (CEO) of Smith’s employer, Cardillo Travel Systems, Just two days earlier, Cardillo’s in‑house at‑ torney, Raymond Riley, had requested that Smith, the company’s controller, sign an affidavit regarding the nature of a transaction Rognlien had negotiated with United Airlines. The affidavit stated that the transaction involved a $203,000 payment by United Airlines to Cardillo but failed to disclose why the payment was being made or for what specific purpose the funds would be used. The affidavit included a state‑ ment indicating that Cardillo’s stockholders’ equity exceeded $3 million, a statement that Smith knew to be incorrect. Smith also knew that Cardillo was involved in a law‑ suit and that a court injunction issued in the case required the company to maintain stockholders’ equity of at least $3 million. Because of the blatant misrepresentation in the affidavit concerning Cardillo’s stockholders’ equity and a sense of uneasiness re‑ garding United Airlines’ payment to Cardillo, Smith had refused to sign the affidavit. When Smith stepped into Rognlien’s office on that day in May 1985, he found not only Rognlien but also Riley and two other Cardillo executives. One of the other ex‑ ecutives was Esther Lawrence, the firm’s energetic
