Question: Memorandum
Facts: You are now a supervisor at a mid-size CPA firm. You prepare the tax returns for a company called Rust & Marty, LLC DBA Yellow King "the Company". In addition you prepare a calendar year end review for Yellow King.
The Company is a privately owned LLC, requiring a review for a bank they finance with and who provides the company a LOC. Marty and Rust are not related but have been friends and business partners for years.
Unfortunately, business has been bad and the company has run loses the last two years. The company will most likely file for Chapter 7 bankruptcy. As such, Rust and Marty had a falling out. Now Rust is suspicious that Marty is stealing money from the company.
Rust has personally asked our firm to perform a "forensic" analysis of the company to see whether Marty has been stealing money. During the analysis we found that Marty was running personal expenses through the company.
Additionally, you have a brother who works at Nelson & Murdock, APC; a sister at Pearson, Specter, Litt, LLP, a rich uncle at The Busch Firm; and an inlaw/outlaw who works at Florrick, Lockhart & Agos. All of these law firms provide legal services to the Company. Does this impact independence?
Discuss the professional standards pertaining to the tax preparation, review and forensic services. Additionally, analyze the CPA's duties to Yellow King, Marty and Rust. Focus on the fact Yellow King is our client and we are performing services for Rust. By performing these duties has our firm violated any laws (common law and statutory) or violated our ethical duties?
Additionally, you have a brother who works at Nelson & Murdock, APC; a sister at Pearson, Specter, Litt, LLP, a rich uncle at The Busch Firm; and an inlaw/outlaw who works at Florrick, Lockhart &Agos. All of these law firms provide legal services to the Company. Does this impact independence? I will provide 1 point of extra credit if you can name the reference for each law firm and the "Yellow King" reference.
DIRECTIONS: Discuss the professional standards pertaining to the tax preparation, review and forensic services. Additionally, analyze the CPA's duties to Yellow King, Marty and Rust. Focus on the fact Yellow King is our client and we are performing services for Rust. By performing these duties has our firm violated any laws (common law and statutory) or violated our ethical duties?
Like assignment #2, use the AICPA standards to determine what course of action needs to be taken. Analyze the facts accordingly and be sure to apply the facts to the rules found in the standards.
Focus on the attest standards, code of professional conduct (independence) and consulting services standards.
Your paper should be double spaced; 12 font; Time New Roman font and 4 pages double spaced. No more than 4 pages, so make the most out of the space you have. Remember this is a memorandum to a Partner level CPA, so the tone should fit accordingly.