You have recently graduated and joined the ranks of an auditing firm. Soon after joining the firm, your overworked audit manager calls you to his office. “This client of ours seems to have interests in various special purpose entities.

We need someone to update us on the accounting treatment of SPEs with respect to group reporting. I heard that you were an outstanding student and are ready to take on any challenge, so you should relish this little research assignment! After that, I’d like you to make a presentation to the audit team so that they can learn from your research.”

After thinking through the “assignment,” you scribbled your action plan:

(a) Provide background understanding of SPEs, particularly with respect to common reasons for their existence. Some real-life examples will be useful.

(b) Identify the accounting issues with regard to group reporting relating to SPEs.

(c) Explain how specific provisions in accounting standards deal with the accounting issues identified.

You recalled that as a student, you used to do keyword searches in the library databases. You will try these sources for a start. You also intend to surf the Internet for other helpful materials. The various articles and sources will be cited in your presentation so as to show your manager that your research has been properly and diligently carried out.