Cpa Report

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CPA Report ACC/545 University of Phoenix Internal Memo To: Management From: CPA Re: Further Information regarding Request Before any information can be given to outside CPA’s, the professional responsibilities of a CPA must be outlined and understood as well as what the differences between a review and an audit are. With the examination of a subsidiary that has been established as a corporation there are certain questions that arise such as: What is the methodology used in determining deferred taxes, What it t he procedures for reporting accounting changes and error corrections, and What is the rationale behind establishing the subsidiary as a corporation. The draft below outlines my response to the questions that have been…show more content…
Items that require estimates are uncollectible receivables, inventory obsolescence, useful lives and salvage values of assets and changes in depreciation methods to name a few. Such accounting estimates will alter as there are new events that occur, as they acquire more experience, or as it obtains further information on the events. Lastly, reporting a change in entity involves reporting the change by altering the financial statements of all prior periods presented. This allows the revised financials to reflect financial information for the newly developed entity for all periods. An example of a change in entity is presenting consolidated statements in place of statements of individual companies or changing the companies included in combined financial statements. Error Corrections There are certain errors that are not as imperative to investors as other errors are. An error that can be classified as significant for example those errors that result in overstatement should always be pointed out to investors. There are certain errors that can reveal weaknesses in a company’s internal controls therefore, resulting in more significant errors. Errors should be corrected as soon as they are discovered. To correct errors the restatement approach should be employed and all prior period statements that are presented should be corrected and the beginning balance of retained earnings for the first period presented should be restated when the error effects occur

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