Wu, a PA, is planning her first audit of a closely held small business. In prior years, Wu compiled the financial statements of the company. She also helped to set up its accounting system and supervised the work of the company’s bookkeeper, who has limited knowledge of accounting. This year, management wants Wu to perform an audit because a local bank has requested audited financial statements as a condition for granting the company a large loan needed to expand operations. During her discussions with management, Wu agreed to conduct the audit and to continue to supervise the company’s day-to-day accounting. This will facilitate the audit work by giving her a good knowledge of the company’s business transactions. The company would like Wu to continue to closely advice and support
management with the bank loan negotiations to secure the best possible loan terms.
REQUIRED
a. Describe the different types of work that Wu is considering, and the stakeholders involved in or affected by this work.
b. Assess the appearance of independence here. Is it possible for Wu to do all of this work and still be independent? Why or why not?