1. You have been asked by a long-term friend to fill a vacancy on the five-person board of trustees for a small private company. The companys principal asset is a banana plantation located on a remote South Pacific island. Your friend is the sole manager of the company which was organized as a trust for the benefit of her and her two brothers, who are also members of the trusts board. The only other trustee director is the companys long-time chief accountant.

Before making your decision, you made inquiries about the companys financial reporting practices. You learned the following:

The companys annual financial statements were not audited by an independent certified public accountant. The trustees believed the benefits of audited financial statements were not worth the cost.

The companys fiscal period ran from January 1 to December 31.

A full set of semiannual financial statements was prepared each year for the six-month period ending June 30. Like the annual financial report, they were available approximately two to three months after the close of the accounting period.

How might the information you learned about the financial reporting practices influence your decision to join the board of trustees?