Question Description

Can you help me understand this Accounting question?

As recalled from my days working for a medium sized accounting firm there were many examples of senor level staff mainly manager level down to senor auditor level that would be offered positions working for the client. After the SOX required “cooling off period” of a year after the year end reports were issued there was less of a loss of independence since it was always a good idea to be friendly both in and outside of the client / accounting firm environment. The accounting firms looked upon a senior manager leaving to work for a client as a good thing for their longevity as the auditor for this and related clients. Accounting firms have a good idea of which senior managers will make it to partner level and knowing this many senior managers are not partner level caliber and therefore rather than these senior managers leaving on a bad note after not making partner having them work for a client and still retain a solid relationship with the accounting firms works well for all parties.

Independence of the client hired senor accounting manager with their relationship to their old employer and other staff members is a challenge. Many of the old coworkers which were at lower levels in the firm that will be promoted to higher levels and may even work on the client that their old senor manager now works is something that requires review to ensure there is no loss of Independence. The following key elements should be maintained to ensure intendance by the auditor is retained, the senior manager cannot influence in any way the old firms operations or financial policies as they relate to the client that has hired them or any old client of the firm. The relationship with the accounting firm must be cut off from a financial basis and the existing staff member must be paid in full for his or her capital balance or other compensation so there are no longer any financial links. Any future amounts that may be due the existing staff member such as retirement funds or profit sharing cannot depend on the firm’s future revenues or profitability and must be fixed at date of leaving. These controls on financial links to the prior firm will help to create a more independent relationship with the old accounting firm.

Personal relationships such as close friends or spouses that continue to work at the accounting firm will always create more or a perceived lack of independence and must be worked on to ensure that these relationships never come into conflict with the firms relationship with the client. As in our case study of Health Management, Inc. the fact that Mr. Drew Bergman was not only close friends with the promoted manager Ms. Mei-ya Tsai who not only worked for Drew Bergman when he was at BDO but worked with him for about 20 engagements. The two knew each other well and their families spent many holidays and weekends together. In addition Drew’s wife was a staff member of the BDO firm as well and remained close friends in the work office with Mei-ya which also created a perceived conflict. Given this close relationship the BDO firm should never have allowed Mei-ya to manage the HMI account but as they did then once the tail of the in transit inventory was disclosed on the first day of field work then the senior manager should have asked to be removed from the account or at the least put in place high controls to test the inventory process and ensure that the in transit inventory was correct. None of this had taken place so there should have been as there was a perceived lack of independence between BDO and HMI creating a storm of legal matters to ensue.

FNU Inventory Cost Flow Assumptions and Financial Reporting QuestionsSchool

Florida National University

Question Description

I need support with this Accounting question so I can learn better.

PARAGRAPH 1:Describe the importance of control over inventory, & Describe three inventory cost flow assumptions and how they impact the income statement and balance sheet.

PARAGRAPH 2:Describe and illustrate the use of a bank reconciliation in controlling cash, & Describe the Sarbanes-Oxley Act of 2002 and its impact on internal controls and financial reporting.

PARAGRAPH 3:Describe the common classes of receivables,& Describe the accounting for uncollectible receivables