1. Pizza GO, a mid-sized family-owned but growing business, has a $1 million lawsuit pending due to an angry customer consuming spoiled pizza. Its year-end financial statements are being prepared. The GAAP loss must be accrued if a loss is probable. (Probable meaning more likely than not a loss will occur (i.e. Odds of loss over 50%)). Several investors have expressed interest in injecting millions in expansion capital. The CEO is very anxious to obtain the funding, as it may make or break the company. He needs to present the financial statements to Investors in one week. You are the Accounting Manager for Pizza Go and must decide whether to accrue the loss or not. The company attorneys state they think loss is probable to likely probable. The correct choice would be:

a. Dont accrue because the lawsuit is still pending.

b. Restate the financial statement once the year end statement is complete.

c. Accrue the loss to take the conservative approach.

d. Accrue the loss because third party information confirms required application.

2.

Pizza GO, a mid-sized family-owned but growing business, has a $1 million lawsuit pending due to an angry customer consuming spoiled pizza. Its year-end financial statements are being prepared. The GAAP loss must be accrued if a loss is probable. (Probable meaning more likely than not a loss will occur (i.e. Odds of loss over 50%). Several investors have expressed interest in injecting millions in expansion capital. The CEO is very anxious to obtain the funding, as it may make or break the company. He needs to present the financial statements to Investors in a week.

You are an auditor for the CPA firm that will be auditing Pizza Go. Your father is the CEO of Pizza Go. What is the reason why you cannot accept the assignment?

a. It is a violation of the objectivity and independence principle.

b. It is a violation of the due care principle.

c. It is a violation of the public interest principle.

d. It is a violation because the scope and nature of services is not consistent with standards.