NORTHERN FRONTIER PARK
Assume you are an audit senior employed by an international public accounting firm. On May 1, 2016, Ms. Benice, a partner in the firm, invites you to her office to discuss a special engagement that you will be supervising. To ensure the engagement runs smoothly, she has
asked you to summarize-in a written planning memorandum-all important risks and factors to be considered when conducting the engagement.

The client for the special engagement is Northern Frontier Park (NFP), a privately-held company that operates a safari-style wildlife park in the northern Ontario. Until late last year, NFP had been owned and managed by Mr. Kramer, founder and Chief Executive Officer (CEO).
Upon Mr. Kramer's death in 2015, all shares in the company were distributed to his family. Because no one in Mr. Kramer's family wants to take over the business, the family will sell 100% of the NFP shares at the end of the current fiscal year to Newman, the current controller
and Chief Financial Officer (CFO) of NFP. Because NFP is a private company, a market price for the shares is not readily available. Instead, the purchase/sale price will be based on a multiple of five times the income earned from "continuing operations" in the year ended May 31, 2016, calculated using ASPE. To ensure NFP's reported net income is appropriate, the Kramer family has engaged your firm to provide assurance that the year-end financial statements are reliable and are representative of on-going operations. In past years, NFP's financial statements always have been prepared by the CFO without audit or review.

Similar to wildlife safari parks in Africa, visitors drive through NFP's 3200-acre park, which is home to over 100 species of native animals, birds, and fish. Although hunting is not allowed in the park, fishing is permitted from man-made lakes that NFP constructed and began
stocking with fish two years ago. The NFP park has become a popular year-round tourist attraction, with the number of vehicle admissions increasing from 40,000 in 2008 when the park opened to over 55,000 in the 2015 fiscal year. Most of NFP's revenues are earned through park admission and hotel accommodation fees. Each vehicle admitted to the park is charged a $20 entrance fee, and approximately one-third of all park visitors stay in NFP's 85-room hotel. With an average nightly rate of $110, hotel occupancy rates typically average 60% each year. Most purchases and payments relate to animal and fish acquisition, feeding, and medical care, as well as to hotel administration and operations.

To assist you in preparing the planning memorandum, Ms. Benice has provided you with unaudited financial statements prepared by the CFO (Exhibit 1) and other relevant client information (Exhibit 2). Upon reviewing this information, you recognize that because today's date (May 1) precedes NFP's year-end (May 31), only 11 months of operations are included presently in NFP's income statement. Ms. Benice's discussions with the CFO indicate that although the balances on the 12-month income statement will be larger, their relative percentage
of revenues (as shown) are unlikely to change.

Requirements

1. Identify two individuals or groups, other than the accounting firm, who benefit from this special investigation. Explain how each beneficiary is likely to be affected by the resulting financial statements.

2. Evaluate the following accounting decisions in 2015 using the "Diamond Approach" by identifying the chosen accounting method, any shortcomings in this chosen method, evaluate the issue through a balanced discussion by applying judgement criteria/arguments and present any adjusting entries to correct any shortcoming. All adjustments must comply with generally accepted accounting principles for private
enterprises. Ignore any tax effects

a. The write-off of fish stock
b. The change in accounting for animals from specific identification to average cost
c. The change in the useful life of hotel buildings
d. The liability accrued for damaging park ecology.

3. Discuss Newman's bias, the degree to which this bias may be influencing his accounting choices and the resulting effects of this bias to Newman and the Kramer family.