There are no results for Tammy Potter, a new partner with the regional CPA firm of Tower & Tower, was recently appointed
Posted: Mon Apr 25, 2022 7:28 am
There are no results for Tammy Potter, a new
partner with the regional CPA firm of Tower & Tower, was
recently appointed to the board of directors of a local civic
organization. The chairman of the board of the civic organization
is Lewis Edmond, who is also the owner of a real estate development
firm, Tierra Corporation. Potter was quite excited when Edmond
indicated that his corporation needed an audit and he wished to
discuss the matter with her. During the discussion, Potter was told
that Tierra Corporation needed the audit to obtain a substantial
amount of additional fi nancing to acquire another company.
Presently, Tierra Corporation is successful, profi table, and
committed to growth. The audit fee for the engagement should be
substantial. Since Tierra Corporation appeared to be a good client
prospect, Potter tentatively indicated that Tower & Tower
wanted to do the work. Potter then mentioned that Tower &
Tower’s quality control policies require an investigation of new
clients and approval by the managing partner, Lee Tower. Potter
obtained the authorization of Edmond to make the necessary
inquiries for the new client investigation. Edmond was found to be
a highly respected member of the community. Also, Tierra
Corporation was highly regarded by its banker and its attorney, and
the Dun & Bradstreet report on the corporation reflected
nothing negative. As a final part of the investigation process,
Potter contacted Edmond’s former tax accountant, Bill Turner.
Potter was surprised to discover that Turner did not share the
others’ high opinion of Edmond. Turner related that on an IRS audit
10 years ago, Edmond was questioned about the details of a large
capital loss reported on the sale of a tract of land to a trust.
Edmond told the IRS agent that he had lost all the supporting
documentation for the transaction, and that he had no way of
finding out the names of the principals of the trust. A search by
an IRS auditor revealed that the land was recorded in the name of
Edmond’s married daughter and that Edmond himself was listed as the
trustee. The IRS disallowed the loss and Edmond was assessed a
civil fraud penalty. Potter was concerned about these findings, but
eventually concluded that Edmond had probably matured to a point
where he would not engage in such activities. Based on the case
above, respond to the following prompts: a. Present arguments
supporting a decision to accept Tierra Corporation as an audit
client. b. Present arguments supporting a decision not to accept
Tierra Corporation as an audit client. c. Assuming that you are Lee
Tower, set forth your decision regarding acceptance of the client,
identifying those arguments from part (a) or part (b) that you
found most persuasive. Your assignment should be submitted in a
Word document and follow proper APA formatting. This assignment
should be approximately three pages in length.
partner with the regional CPA firm of Tower & Tower, was
recently appointed to the board of directors of a local civic
organization. The chairman of the board of the civic organization
is Lewis Edmond, who is also the owner of a real estate development
firm, Tierra Corporation. Potter was quite excited when Edmond
indicated that his corporation needed an audit and he wished to
discuss the matter with her. During the discussion, Potter was told
that Tierra Corporation needed the audit to obtain a substantial
amount of additional fi nancing to acquire another company.
Presently, Tierra Corporation is successful, profi table, and
committed to growth. The audit fee for the engagement should be
substantial. Since Tierra Corporation appeared to be a good client
prospect, Potter tentatively indicated that Tower & Tower
wanted to do the work. Potter then mentioned that Tower &
Tower’s quality control policies require an investigation of new
clients and approval by the managing partner, Lee Tower. Potter
obtained the authorization of Edmond to make the necessary
inquiries for the new client investigation. Edmond was found to be
a highly respected member of the community. Also, Tierra
Corporation was highly regarded by its banker and its attorney, and
the Dun & Bradstreet report on the corporation reflected
nothing negative. As a final part of the investigation process,
Potter contacted Edmond’s former tax accountant, Bill Turner.
Potter was surprised to discover that Turner did not share the
others’ high opinion of Edmond. Turner related that on an IRS audit
10 years ago, Edmond was questioned about the details of a large
capital loss reported on the sale of a tract of land to a trust.
Edmond told the IRS agent that he had lost all the supporting
documentation for the transaction, and that he had no way of
finding out the names of the principals of the trust. A search by
an IRS auditor revealed that the land was recorded in the name of
Edmond’s married daughter and that Edmond himself was listed as the
trustee. The IRS disallowed the loss and Edmond was assessed a
civil fraud penalty. Potter was concerned about these findings, but
eventually concluded that Edmond had probably matured to a point
where he would not engage in such activities. Based on the case
above, respond to the following prompts: a. Present arguments
supporting a decision to accept Tierra Corporation as an audit
client. b. Present arguments supporting a decision not to accept
Tierra Corporation as an audit client. c. Assuming that you are Lee
Tower, set forth your decision regarding acceptance of the client,
identifying those arguments from part (a) or part (b) that you
found most persuasive. Your assignment should be submitted in a
Word document and follow proper APA formatting. This assignment
should be approximately three pages in length.