Arguments in favor of restricting public accounting firm

Assignment Help Auditing
Reference no: EM13954493

Smith & Co, a local Dallas public accounting firm, is incorporated as a professional corporation, with three shareholders, all CPAs. The shareholders have developed a combination of marketing, software, and professional expertise that has allowed them to perform the accounting service of compiling individual's personal financial statements M an extremely efficient manner.

The three shareholders are interested in "going national" with their accounting service but lack the capital necessary to expand to other cities. They are currently considering the possibility of obtaining outside capital as a way to expand their business by offering their firm's services to individuals in other markets. They estimate that if they raised $4 million of capital they could open and staff 15 offices within the next 12 months.

In a recent meeting of the three shareholders, the possibility of raising the capital through incorporation as a traditional corporation mid thereby selling stock to the public was discussed. The original three shareholders would retain 51 percent of the total stock, which would be traded over the counter. The only work performed through the new corporation would be: the compilation of individuals' financial statements.

Subsequently, the shareholders were dismayed to learn that states do not generally allow CPAs to practice as a traditional corporation. Also, those states that do allow "limited liability companies" generally require that shareholders be involved in public accounting. Only by establishing a separate organization not held out as a public accounting firm will the current three shareholders be allowed to follow their expansion plan.

a. Summarize the arguments for allowing public, accounting firms to sell ownership interests to individuals not in public accounting through incorporation as a traditional corporation.

b. Summarize the arguments in favor of restricting public accounting firm ownership to those involved in public accounting.

c. Express your personal opinion as to whether ownership of public accounting firms should be restricted to individuals involved in public accounting.

Reference no: EM13954493

Questions Cloud

Recent financial disasters in the news : Because of recent financial disasters in the news, the board of directors of your company decided that they wanted to ascertain that the organization's code of ethics was appropriate and in agreement with the Code of Professional Conduct (CPC) as ..
How the global scope has changed over time : How this global scope has changed over time. Identify the competitive advantages that your organization gains from the resources in its home country and/or another country or countries where it conducts significant activities.
Define what is master plan : Define what is Master Plan - List the effects of this proposed project on the environment by keeping in view the deifintion of the "environment" under the Environmental Assessment Act;
Explain what types of quality management processes : Please answer with cited source (APA format) the below questions. Organizational structures are functional, divisional, matrix, team-based and virtual network.
Arguments in favor of restricting public accounting firm : Summarize the arguments in favor of restricting public accounting firm ownership to those involved in public accounting - Summarize the arguments for allowing public, accounting firms to sell ownership interests to individuals not in public accounti..
Show that particle motion about one end of diameter passing : In the absence of a gravitational force, show that the particle's motion about one end of a diameter passing through the pivot point and the center of the circle, perpendicular to the axis of rotation, is the same as that of a plane pendulum in a ..
Problem regarding the consolidated financial statements : You are the management accountant of Tree plc, a listed company that prepares consolidated financial statements. Your Managing Director, who is not an accountant, has recently attended a seminar at which key financial reporting issues were discuss..
Calculate your probability for a nucleus : When we developed Gamow's theory of alpha emission, we assumed the alpha particle was preformed in the nucleus. there is some evidence that nucleon clusters continually form and breakup in the nucleus and that alpha emission requires the formation..
Reporting the substance of transactions : The objective of FRS 5 - Reporting the substance of transactions, is to ensure that a reporting entity's financial statements report the substance of the transactions into which it has entered.

Reviews

Write a Review

 

Auditing Questions & Answers

  Covenants are extracted from the indenture

The following covenants are extracted from the indenture of a bond issue.

  Explain the key audit tests

Explain the key audit tests which would normally ensure that such a fraud as that perpetrated by Mr A Long would be detected and discuss the implications of the signing of the 'confidentiality' agreement by the auditor.

  How do the two journal entries look

The for-profit entity sells $120,000 with net 30-day terms, while the nonprofit entity has a fund raising drive for which they receive pledges of $120,000. How do the two journal entries look?

  How the rule changed and what are things that changed

What is your view, giving a rational explanation to your view (you may use other sources to support your view, properly referencing). Why do you think that these measures were introduced?

  Creating fictitious inventory by adding false count sheets

For each account identified in a) identify and explain the most relevant audit assertion affected (you should identify no more than 2 assertions for each account).

  Doug''s policy is to use 50 percent or less of overall mater

The book value of inventory on the entity's records is $ 1,090,000. Overall materiality for the engagement is $ 500,000. Doug's policy is to use 50 percent or less of overall materiality as tolerable misstatement for any one account. x`x`

  Explain why they require special attention

You have just been appointed as the auditor of Gritty Manufacturing Ltd and you are in the process of planning your first audit. Gritty manufactures security cameras and is a part of the electronics industry.

  Impact on the annual internal audit plan

What is internal audits role in the organization's ethics and compliance program and what is the board's role in the organization's ethics and compliance program?

  Importance of the internal controls

Please explain the importance of the internal controls necessary to account for cash, purchases, and sales?

  Evaluate profit and loss for given case

Write journal entries for each transaction and Evaluate profit and loss for given case

  Notification to regulatory agency

During the audit of a regulated company you find that in three instances there were events that occurred that required the company to notify the regulatory agency of their occurrence.

  Describe the rationale for the selection of the benchmark

Basis for Materiality Amounts. Considering the needs and expectations of financial statement users, describe the rationale for the selection of the benchmark and percentages in steps 2Ä4.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd