You are the partner in charge of audit quality for Jones and Company CPAs (the Firm). One
Question:
You are the partner in charge of audit quality for Jones and Company CPAs (the Firm). One of your tax partners, Brooks, has reached out to you regarding a question of auditor independence. In your discussion with Brooks, you understand the following regarding an existing tax client of the Firm, Golf Corporation (the Company). This discussion took place on October 10, 2022.
- The Company is a startup company that is currently enjoying tremendous success providing maintenance and renovation services for golf courses and golf clubs throughout the United States.
- For the last 4 years, the Firm's tax department has provided tax planning and compliance services for the Company. The Firm's services have spanned the Company's formation through the date of your conversation with Brooks.
- The Company prepares its own internal financial statements which have been given to its bank each year of the Company's existence.
- The Company does not have depreciation software and as a part of the Firm's tax compliance and planning services, Jones and Company have maintained the Company's book and tax depreciation schedules from the Company's formation through September 30, 2022.
- In order for Jones and Company to maintain the depreciation schedules for the Company, the Company's CFO (who is a CPA) gives Jones and Company on a monthly basis, details regarding acquisitions, including useful lives and salvage values and the methods of depreciation that the Company wants to use. For financial reporting purposes the Company uses the straight-line method and for tax purposes uses accelerated methods to the fullest extent available for the Company.
- Effective January 1, 2023, the Company's bank is going to require the Company to provide the bank with audited financial statements. The Company's bank has indicated that for 2023 (the first year of the audit requirement) there will only be a requirement for single period financial statements.
Required:
After reviewing the AICPA Code of Professional Conduct and the AICPA's Frequently Asked Questions: Nonattest Services, as of October 6, 2021, needed is a brief memorandum for the Firm's audit file that will address any independence matters identified during your discussion with Brooks. For purposes of this exercise, you are to assume that there on no other possible independence matters related to the Firm's audit of Yankee Corporation.
Accounting Information Systems
ISBN: 9780132871938
11th Edition
Authors: George H. Bodnar, William S. Hopwood