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That doesn't sound right to me, as well as my 7D I have a powershot A640 and an SX10IS bridge camera and both of those will set 1/60th of a second shutter speed on auto (I have just tried it), it sounds like a fault.
It would be totally unusable if it was supposed to do that, I can understand the ISO 400 but not the shutter speed with flash, is the flash firing as I would expect the images at 1/15 to be over exposed with flash.
I would reset it to factory settings and try again (to be sure), if it still does it then take it back as it doesn't sound right, if it is supposed to do that then it is not fit for purpose.
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