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Question - Total Fresh Products manufactures and distributes snack foods. Total Fresh Products is being audited for the first time by Rachel Fancy, a partner in a local CPA firm. Early in the audit, Rachel uncovered that the CEO had acquired a home media system, a Mercedes Benz, and an exercise pool for his personal use. These items were delivered to the CEO's home, and they were recorded in the accounting records as professional services. On Total Fresh Products' most recent federal tax return, the items were included in deductible business expenses.
What should Rachel Fancy do with the information she has uncovered?
What impact should the discovery have on how she proceeds with the audit?
How should the findings be reflected in her audit opinion report?
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