Reference no: EM131287832
Enormo Corporation is a large multinational audit client of your CPA firm. One of Enormo' s subsidiaries, Ultro, Ltd., is a successful electronics assembly company that operates in a small Caribbean country. The country in which Ultro operates has very strict laws governing the transfer of funds to other countries. Violations of these laws may result in fines or the expropriation of the assets of the company.
During the current year, you discover that $50,000 worth of foreign currency was smuggled out of the Caribbean country by one of Ultro's employees and deposited in one of Enormo's bank accounts. Ultro's management generated the funds by selling company automobiles, which were fully depreciated on Ultro's books, to company employees.
You are concerned about this illegal act committed by Ultro's management and decide to discuss the matter with Enormo's management and the company's legal counsel. However, Enormo's management and board of directors seem to be unconcerned with the matter and express the opinion that you are making far too much of a situation involving an immaterial dollar amount they also believe that it is unnecessary to take any steps to prevent Ultro's management from engaging in illegal activities in the future. Enormo's legal counsel indicates that the probability is remote that such an illegal act would ever be discovered, and that if discovery were to occur, it would probably result in a fine that would not be material to the client's consolidated financial statements.
Your CPA firm is ready to issue the integrated audit report on Enormo's financial statements and internal control for the current year, and you are trying to decide on the appropriate course of action regarding the illegal act.
Discuss the implications of this illegal act by U1tro's management.
Describe the courses of action that are available to your CPA firm regarding this matter.
State your opinion as to the course of action that is appropriate. Explain.
Use straight line depreciation
: A proposal to manufacture 4731 ton/yr of a halogenated organic intermediate is set out below: Assume 50% of the total FCI is spent in first year of construction period. Use Straight line depreciation. No Start-up expense. What is the NPW of this proj..
|
Compute amount of amortization of deferred pension gain
: City of Frisco has a defined benefit pension plan. As of January 1, 2015, the following balances were computed for its pension plan. Compute the amount of amortization of deferred pension gain or loss for the calendar year 2015. Compute the amount of..
|
Statements concerning custodial accounts
: All of the following statements concerning custodial accounts are correct, except:
|
Recommend improvements in procedures
: You have been asked by the board of trustees of a local church to review its accounting procedures. The church's board of trustees has delegated responsibility for financial management and the financial records to the finance committee. Describe the ..
|
Discuss the implications of this illegal act
: Enormo Corporation is a large multinational audit client of your CPA firm. One of Enormo' s subsidiaries, Ultro, Ltd., is a successful electronics assembly company that operates in a small Caribbean country. Discuss the implications of this illegal a..
|
Puckett applies the equity method
: On January 1, Puckett Company paid $3.20 million for 80,000 shares of Harrison’s voting common stock, which represents a 40 percent investment. No allocation to goodwill or other specific account was made. Significant influence over Harrison is achie..
|
Analyst for the professional service firm
: Investment Decisions for Big Spenders Inc. Background You are an Analyst for the professional service firm, BUSI 1043 LLP. Your firm specializes in providing a wide variety of internal business solutions for different clients. It is your first day on..
|
Cost of production report using the weighted average method
: Calumet Enterprises manufactures Sniffstop cold medicine using a process costing system. The processing department has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). Prepare a cost of producti..
|
The effective-interest method to amortize the discount
: On January 1, 2017, Cullumber Company issued a $1,238,700, 5-year, zero-interest-bearing note to Riverbed Bank. The note was issued to yield 8% annual interest. Unfortunately, during 2018 Cullumber fell into financial trouble due to increased competi..
|