At a new client meeting, the outside CPA learns the following:

1. The recently firedbookkeeper has been discovered as embezzling over $100,000, but the full amount is not yet quantified.The tax preparer was related to the bookkeeper.

2. There is a foreign entity (China) company and the books and records are not translated.It is unclear as to whether it is owned by the owner or the corporation.

3.The staffing is light and the human resources person is doing the billing and the payroll.There are no management concerns with this person.

4. There is a $1 million line of credit for the company with a major bank.

5. The company uses an add-on to QuickBooks for the time and billing (services company) and QuickBooks for the general ledger.

6. The reimbursement policy is nonconforming to the IRS rules.

7. There are three unrelated owners that are all engineers by training.

Questions:As an Outside CPA/Auditor:

I.As the outside CPA, what ethical obligations to you have to the professional for taking an assignment like this?Specifically, what type of work is possible?

II.What threats are posed to the outside CPA?

III.What safeguards can be applied at the outside CPA level?

IV.How should the China business be dealt with?

V. What obligations do you have for the potential tax issues?How would you document or discuss these issues?

As the newly hired CPA/controller for the same company above:

Questions:

I.If you work to work for the company as the CPA controller, what threats do you see on the onset?

II.What safeguards can you put in place?

III.How would you handle the remaining staff?

IV.If the human resources staff has been working well at the job, then what is the harm of letting the payroll remain with HR?

V. What would you insist be in your employment agreement?