Essay on Case 1

Submitted By Javi0613HotmailC
Words: 963
Pages: 4
Open Document
Case 1: MHA Textile Corporation
Over the last 15 years, MHA Textile Corporation has been one of PwC’s audit clients and has established a professional, constructive working environment with them. Currently, NYH, one of MHA Textile Corporation’s subsidiaries, is going through some tough economic times that have seen it layoff employees in their accounting department and has implemented many cost-cutting strategies in order to remain profitable. Due to the many employee layoffs, the accounting department’s remaining three workers have had to undertake many additional tasks. In an attempt to alleviate the amount of work she needs to complete, Susan, NYH’s accounting manager, has asked of the auditor to guide her through the regulatory accounting guidance for closing costs reflected in FAS 146, Costs Associated with Exit or Disposal of Activities.
Part A: If the auditor were to sit down with Susan and guide her through the framework in FAS 146, there would be some advantages to this approach but substantial disadvantages. One of the advantages in helping your client would be that you would save substantial time when you are checking over management’s work. For example, instead of relying on the client to complete the source documents related to closing costs, the auditor can guide Susan on the proper methods to use in the creation of the document and not have to audit that document in the future. This can save the client in audit fees and will also benefit the consistency of their financial statements with respect to GAAP. Another benefit that the auditor can see by helping Susan would be to strengthen the 15-year relationship that PwC has had with MHA Textile. The auditor might think if he renders this non-audit service assistance to the client it can lead to a potential client continuance decision that can provide future revenue to the audit firm. Given these benefits, there are also many potential threats that can arise. The main disadvantage of helping Susan with determining the closing costs is that it mainly violates the AICPA Requirement Framework on Independence. While the auditor would save some time in auditing the source documents for the client, the auditor would be in violation of the self-review threat under SOX Section 201: Services Outside the Scope of Practice of Auditors; Prohibited Activities, which states that it is “unlawful” for a registered public accounting firm to provide a non-audit service to an audit client that is related to bookkeeping or other services related to accounting records. The reason it violates the independence standard is because if the auditor helps Susan prepare the closing costs documents, the auditor would essentially be reviewing his or her own work. Another disadvantage is, due to the fact that the auditor would be fulfilling management’s duties, he would be in violation of SOX: Section 206: Conflicts of Interest, which states that no Controller can be employed by an audit client unless it is after a 1-year preceding period. Since the auditor is helping Susan and acting as a current employee of NYH, he clearly violates this section of SOX, which states his conflict of interest.
If the auditor decides to refuse to give further guidance, there can be many benefits that will allow the business relationship between the firm and the audit client to continue in the future. First of all, the reputation of the audit firm is upheld. In the audit practice, the least thing you want to see is a headline on the front of a newspaper mentioning your firm’s audit malpractice. Upholding your firm’s reputation speaks a lot to the skills and qualities of the engagement team. Adhering to the auditing and ethical standards required of the engagement team not only ensures the reliability and the usefulness of the financial statements but also the
Show More

Related Documents: Essay on Case 1

Case 1 1 Essay

Subject: Case 1-1 Ribbons an’ Bows, Inc. Financial Standing I have been asked to share my opinion on the financial standing, profitability, why the decline in cash after three months, and whether I consider the first three months successful for the business, Ribbons an’ Bows. The summary of the financial situation is presented below, followed by my opinion of the situation. Carmen Diaz opened Ribbons an’ Bows, Inc. on April 1, 2010 from the help of two cousins loaning a total amount of $10,000…

Words 755 - Pages 4

Essay Case 1

CASE 1: GROUPON (Due 10/26/2014 10:00PM) Case Requirements: Form a group of no more than 4 students. Go to the SEC website (www.sec.gov) and locate Groupon’s initial registration statement (S-1) dated on 06/02/2011, the SEC’s comment letter dated on 06/30/2011, Groupon’s response on 07/14/2011, and Groupon’s revised registration statement (S-1/A) on 11/01/2011. Read relevant materials from the SEC’s website and the FASB Accounting Standard Codification system. Answer the following 6 questions…

Words 405 - Pages 2

Essay on CASE 1

The fit stop case study Wei Zheng 200084324 Overview: Susan Superfit who is a founder of brand new sport equipment firm. The firm plans to specialize in this equipment and provide customers with personalized advice geared to customer needs. She hope her firm can help customer choice which equipment is more suitable. She came up with the idea for this business during her recovery. She found that most of seller lacked in knowledge for equipment; therefore, they often gave poor advice…

Words 676 - Pages 3

Case 1 Essay

1. Consider a 1-Year $10,000 CD A. The future value of a $10,000 CD that has a maturity of 1 year at maturity with 10% interest is $11,000. Financial Calculator Inputs: $ -10,000=PV, 1=N, I=10, FV=? ($11,000) B. The future value of a 1-year, $10,000 CD after one year at an interest rate of 5.0% is $10,500. Financial Calculator Inputs: $-10,000=PV, 1=N, 5=I, FV=? ($10,500) The future value of a 1-year, $10,000 CD after one year at an interest rate of 15.0% is $11,500. Financial…

Words 2175 - Pages 9

Case 1 Essay

20 were residents of North Carolina.Each of the individuals sampled was given a standardized test to measure depression. The data collected follow; higher test scores indicate h igher levels of depression. These data are contained in the file Medical 1.A second part of the study considered the relationship between geographic location and depression for individuals 65 years of age or older who had a chronic health condition such as arthritis, hypertension, and/or heart ailment. A sample of 60 individuals…

Words 365 - Pages 2

Case 1 Tecoids

PPDPT 1613: CASE 1: NSAIDS & CORTICOSTEROIDS NJ is a 72 year-old female who has been receiving PT as an outpatient to improve her range of motion (ROM). You are now seeing her as an inpatient for gastrointestinal bleeding. Her previous medical history (PMH) is significant for rheumatoid arthritis and coronary artery disease. Her current medications include: 1. Ibuprofen :NSAID 2. Isosorbide mononitrate: NITRATE 3. Aspirin enteric-coated (low dose -…

Words 956 - Pages 4

Case 1 Essay

Case 1: The Springfield Nor’easters: Maximizing Revenues in the Minor Leagues Q1. Review the case details Exhibit 5 “Survey Questionnaire and Response Distributions” and Exhibit 6 “Buckingham’s pricing matrix worksheet.” Complete filling in the pricing matrix worksheet for Exhibit 6 as taking the role of Larry Buckingham. The Table 1 illustrates Larry Buckingham’s price matrix. Table 1: Larry Buckingham’s price matrix Ticket…

Words 2064 - Pages 9

Case #1 Essay

retailers products or services. -In 1 or 2 paragraphs, evaluate the effectiveness of the retailer social media efforts. Make sure to make reference to the retail market segment that this retailer is targeting and whether or not the social media actives are relevant to promoting the products or services to the target market. NOTE: Please use the forms provided below for this part of the assignment RETAIL SOCIAL MEDIA CASE – Company Profile STUDENT NAME: Retailer #1: H&M Retailer URL : www.hm…

Words 1317 - Pages 6

Essay on Case 1

First Keystone Bank Case 3.4 02-01-2015 1. Internal Controls: Audit should be performed weekly/monthly by an outside auditors or account. Someone unconnected to the records/balance sheets A segregation of duties, never allow one person to complete a transaction from start to finish Rotate personnel, this should be done randomly and for a lengthy period of time to make it effective Require vacation to be taken yearly by personnel and for at least one-two weeks, therefore putting someone else in the…

Words 328 - Pages 2

Tanglewood Case 1

TANGLEWOOD-CASE 1 Tanglewood appears to be in a good position in terms of growth potential and profitability. Though thankful for being able to successfully expand the business, areas of improvement have been uncovered during the process. Currently there are three key issues. One is corporate culture; reflecting the mission of the company through actions. The second is staffing and how to equip the company to effectively compete with stores such as Kohl’s and Target. The third issue is the…

Words 1169 - Pages 5