Fatima Alabanza is president of Sizzling Corporation, a nonpublic manufacturer of kitchen cabinets. She was approached...

 

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Fatima Alabanza is president of Sizzling Corporation, a nonpublic manufacturer of kitchen cabinets. She was approached by Bernadette Mendoza, a partner with Mendoza and Co., a consultancy firm, who suggest that her firm can design a payroll system for Sizzling that will either save her corporation money or be free. She suggests that her firm's fee will be 25% of the savings in payroll for each of the next four years. After four years, Sizzling will be able to keep all future savings. Sizzling's payroll system costs currently are approximately P500,000 annually, and the corporation has not previously been a client of Mendoza. Alabanza discussed this offer with his current CPA, Joef Cope, whose firm annually audits Sizzling's financial statements. Cope states that this is relatively simple task, and that he would be willing to provide the service for P50,000. A. Would either Mendoza or Cope violate the Code of Ethics for Professional Accountants by offering to provide these services? Explain B. Now assume that Sizzling has indicated to Cope that he is leaning toward accepting Mendoza's offer. Cope then offers to prove the service for 15% of Sizzling's savings for the next three years. Would performing the engagement in accordance with the terms of this offer violate the Code of Ethics for Professional Accountants? Explain C. Now go back to the original information (do not consider Cope's in part B). How would your answer to part (A) change if Sizzling was an SEC registrant ( a public company)? Explain Fatima Alabanza is president of Sizzling Corporation, a nonpublic manufacturer of kitchen cabinets. She was approached by Bernadette Mendoza, a partner with Mendoza and Co., a consultancy firm, who suggest that her firm can design a payroll system for Sizzling that will either save her corporation money or be free. She suggests that her firm's fee will be 25% of the savings in payroll for each of the next four years. After four years, Sizzling will be able to keep all future savings. Sizzling's payroll system costs currently are approximately P500,000 annually, and the corporation has not previously been a client of Mendoza. Alabanza discussed this offer with his current CPA, Joef Cope, whose firm annually audits Sizzling's financial statements. Cope states that this is relatively simple task, and that he would be willing to provide the service for P50,000. A. Would either Mendoza or Cope violate the Code of Ethics for Professional Accountants by offering to provide these services? Explain B. Now assume that Sizzling has indicated to Cope that he is leaning toward accepting Mendoza's offer. Cope then offers to prove the service for 15% of Sizzling's savings for the next three years. Would performing the engagement in accordance with the terms of this offer violate the Code of Ethics for Professional Accountants? Explain C. Now go back to the original information (do not consider Cope's in part B). How would your answer to part (A) change if Sizzling was an SEC registrant ( a public company)? Explain

Answer rating: 100% (QA)

A Yes either Mendoza or Cope could potentially violate the Code of Ethics for Professional Accountants Mendoza is offering to provide a service that i... View the full answer