Facts: You are now a supervisor at a mid-size CPA firm.You are performing an audit of a private company who specializes in tower construction.One of the staff members on the audit comes to you and informs you during inventory testing; management stated they would not be able to allow us to physically count the inventory items.Additionally, we would need an employee of the client to identify the difference between the various inventory items.A normal CPA cannot identify the difference between the different tower pieces because they look the same but are valued differently.As such you must research how to follow GAAP and if you will still be able to audit the client or give them an unqualified opinion.

Additionally, you have a brother who works at Nelson & Murdock, APC; a sister at Pearson, Specter, Litt, LLP, and an inlaw/outlaw who works at Florrick, Lockhart & Agos. All of these law firms provide legal services to the Company. Also, you have a rich uncle at Moss Adams (a CPA firm) who provides tax consulting services for the client.

Discuss the standard when auditing inventory, whether you will be able to complete the audit & what facts need to be asked or examined. Additionally, review whether there is an issue with independence. .

Instructions: go to http://www.aicpa.org/Research/Standards/Pages/default.aspx

Review the AICPA sections on Audit and Attest Standards and the Code of Professional Conduct for the answers. REVIEW THE INVENTORY SECTION. Remember the Code of Professional Conduct section relates to the independence issue.