Question
1.Alice Borromeo, a partner in the CPA firm of Jay and Dee, received the following memorandum from Jenny Gomez, president of Gomez Manufacturing Corporation, an
1.Alice Borromeo, a partner in the CPA firm of Jay and Dee, received the following memorandum from Jenny Gomez, president of Gomez Manufacturing Corporation, an audit client of many years.
Dear Alice:
I have a new type of engagement for you. You are familiar with how much time and money we have been spending in installing equipment to eliminate the air and water pollution caused by our manufacturing plant. We have changed our production process to reduce discharge of gases; we have changed to more expensive fuel sources with less pollution potential; and we have discontinued some products because we couldn't produce them without causing considerable pollution.
I don't think the stockholders and the public are aware of the efforts we have made, and I want to inform them of our accomplishments in avoiding danger to the environment. We will devote a major part of our annual report to this topic, stressing that our company is the leader of the entire industry in combating pollution. To make this publicity more convincing, I would like to retain your firm to study what we have done and to attest as independent accountants that our operations are the nest in the industry as far as preventing pollution is concerned.
To justify your statement, you are welcome to investigate every aspect of our operations as fully as you wish. We will pay for your services at your regular audit rates and will publish your "pollution opinion" in our annual report to stockholders immediately following some pictures and discussion of our special equipment and processes for preventing industrial pollution. We may put this section of the annual report in a separate cover and distribute it free to the public. Please let me know at once if this engagement is acceptable to you.
Sincerely,
Jenny Gomez
Required:
Put yourself in Alice's position and write reply to this client's request. Indicate clearly whether you are willing to accept the engagement and explain your attitude toward this proposed extension of the auditor's attest function.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started