Contingent Fees) Fatima Alabanza is president of Sizzling Corporation, a nonpublic manufacturer of kitchen cabinets. She was approached by Bernadette Mendoza, a partner with Mendoza and Co., a consultancy firm, who suggest that her firm can design a payroll system for Sizzling that will either save her corporation money or be free. She suggests that her firm’s fee will be 25% of the savings in payroll for each of the next four years. After four years, Sizzling will be able to keep all future savings. Sizzling’s payroll system costs currently are approximately P500,000 annually, and the corporation has not previously been a client of Mendoza. Alabanza discussed this offer with his current CPA, Joef Cope, whose firm annually audits Sizzling’s financial statements. Cope states that this is relatively simple task, and that he would be willing to provide the service for P50,000. A. Would either Mendoza or Cope violate the Code of Ethics for Professional Accountants by offering to provide these services? Explain B. Now go back to the original information ( do not consider Cope’s in part B). How would your answer to part (A) change if Sizzling was an SEC registrant ( a public company)? Explain
Contingent Fees)
Fatima Alabanza is president of Sizzling Corporation, a nonpublic manufacturer of kitchen cabinets. She
was approached by Bernadette Mendoza, a partner with Mendoza and Co., a consultancy firm, who
suggest that her firm can design a payroll system for Sizzling that will either save her corporation money
or be free. She suggests that her firm’s fee will be 25% of the savings in payroll for each of the next four
years. After four years, Sizzling will be able to keep all future savings. Sizzling’s payroll system costs
currently are approximately P500,000 annually, and the corporation has not previously been a client of
Mendoza.
Alabanza discussed this offer with his current CPA, Joef Cope, whose firm annually audits Sizzling’s
financial statements. Cope states that this is relatively simple task, and that he would be willing to
provide the service for P50,000.
A. Would either Mendoza or Cope violate the Code of Ethics for Professional Accountants by
offering to provide these services? Explain
B. Now go back to the original information ( do not consider Cope’s in part B). How would your
answer to part (A) change if Sizzling was an SEC registrant ( a public company)? Explain
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