A corporation is a legal entity
ACC 499 Midterm Part 1 (Set 3)
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ACC 499 Week 10 Assignment 3 Capstone Research Project
(2 Papers)
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ACC 499 Week 10 Assignment 3: Capstone Research Project
Assume you are the partner in an accounting firm hired to perform the
audit on a fortune 1000 company. Assume also that the initial public
offering (IPO) of the company was approximately five (5) years ago
and the company is concerned that, in less than five (5) years after the
IPO, a restatement may be necessary. During your initial evaluation of
the client, you discover the following information:
The client is currently undergoing a three (3) year income tax
examination by the Internal Revenue Service (IRS). A significant issue
involved in the IRS audit encompasses inventory write-downs on the
tax returns that are not included in the financial statements. Because
of the concealment of the transaction, the IRS is labeling the treatment
of the write-down as fraud.
The company has a share-based compensation plan for top-level
executives consisting of stock options. The value of the options
exercised during the year was not expensed or disclosed in the
financial statements.