Carly Simmons is approached by a small sole proprietor to assist him in getting the record-keeping for the enterprise organized to firm up receivables, payables, payroll, and other taxes necessary to run the business. It seems the owner intends to apply for a $50,000 loan at the bank. During the month following their initial discussion and agreement on services, Carly established a suitable internal control system, assisted the bookkeeper with setting up a “Quick Books” type of record-keeping, prepared to adjust and closing entries for the month, and discussed the computerized financial statements with the owner. Answer the following:
a. Should Carly have gotten an engagement letter? If so, what should it have included?
b. What type of compilation service has Carly performed? Does she have to prepare a compilation report?
c. What legal liability issues would be of concern to you if you were Carly?