Professional Standards Case Please use the AICPA Professional Standards to answer each of the following questions. Please cite the section of the professional standards where you found your answer. You may not cite other sources (e.g. a text book or other on-line sources). This must be completed on an individual basis and will be worth 25 points (5 points per question below.) Please type your solutions and upload the completed file to D2L in the appropriate dropbox. You may quote sections of the standards as long as you properly note it as a quote 1. You are audit senior on the audit of Raider Express Freight Lines, a private company that is a new client for your firm. You inquired of management whether the company had engaged in any related- party transactions. They told you about three different related-party transactions, and you investigated those transactions as required by the professional standards. However, you just learned that the company is leasing its major distribution warehouse from a partnership in which the CEO own a 50% interest. This related-party transaction was not disclosed to the auditors by management. How should the auditors respond? 2. You are reading an article in the Journal of Accountancy, and the article refers to the concept of performance materiality What is the definition of this term? 3. You were approached by a new client, Boro Body Shop, Inc. (BBS) about a potential tax engagement. They had a tax preparation firm (who were not CPAs) prepare their tax return last year. BBS now believes that the tax preparation firm made numerous mistakes when completing the return, resulting in BBS paying more tax than what should have been paid. BBS wants to hire your CPA firm to prepare an amended tax return to obtain a refund of the excess taxes paid. BBS said they will pay your firm 25% of the refund received. Can your firm accept this engagement under these terms? [Hint: Use the Code of Conduct to answer this questions. The numbering system of the Code of Conduct begins with 'ET. 4. You are completing a review engagement for Hawkeye Oil & Gas You have become aware that the company is involved in a particularly important lawsuit, and you believe this is critical information for the users of the financial statements. You know that it is appropriate to add an emphasis of matter paragraph for audits. Is it appropriate for a CPA to add an emphasis of matter paragraph to a review report? [Use the AR-C standards to answer this question.] 5. You have been asked by a client to perform an "agreed upon procedures" attest engagement for a client that has an internal audit department. Can you use the work of the internal auditors for an 'agreed upon procedures' engagement? (Use the AT-C standards to complete this question.) Please see the other side of page for an example question and
