Cpa Memo

In: Business and Management

Submitted By royally123
Words 508
Pages 3
Memo on My Responsibilities I will be auditing publicly traded company, known as “fictitious corporation” from this point forward. I will evaluate fictitious corporation to ensure the company reporting is consistent with the Generally Accepted Accounting Principles (GAAP). In addition, I will evaluate the company to ensure their methodology is acceptable for determining deferred taxes and that their procedures for reporting accounting changes and/or error corrections is being carried out correctly. Lastly I will audit fictitious corporation to ensure that the company’s rationale behind establishing one of their newer subsidiaries as a corporation.
Methodology for determining deferred taxes
We will look to see how the company is treating their deferred taxes and which methodology they should be using. The company should be determining deferred taxes based on the prior year’s difference between income tax expense and its income tax payable. It is important that there will be differences that arise between fictitious corporation’s income tax expense and income tax payable as this company uses the full accrual method for financial reporting but when looking at taxes they are evaluating based on a modified cash basis.
Procedures for reporting accounting changes/error corrections
We will look to see how fictitious corporation is reporting their accounting changes. We are also intending to look at any error correction to ensure they were handled appropriately as well. I will be sure to first start off by informing fictitious corporation that we as an audit firm do not recommend accounting changes unless they are definitely determined to be necessary from an internal point of view. I will be sure to inform fictitious corporation that changes subtract from the ability to compare among multiple accounting periods and between different comparable companies…...

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