You are Mary, a manager working on a compilation engagement for Prowinter, a snow removal company. Prowinter is a recurring client of your employer, Tripplecrown Accounting Services (TAS), and over the years, you have managed to build a solid relationship with Stan, the owner and manager. The activity of the company is growing fast and Stan explained to you that to finance new snow-removal equipment for the next winter, he will probably need to borrow money to the bank in the near future. He is aware that banks usually require reviewed or audited financial statements. 

 

The compilation work has started, and early this morning, you have received a phone call from Stan, who asked you to provide him with more details about the recent changes regarding compilation engagements. He wants to know about the effects of the change, and he also wonders if this new regulation will impact the fees. In addition, he explained that this year, Prowinter will also need tax consulting. Stan wants to know if TAS can provide this additional service when the compilation engagement is completed.

You are drafting a memo to Stan with the responses to his questions.

 

Later the same morning, the senior working with you on the file informed you that she discovered that there is no invoice to support a $300,000 expense. This amount is material. When you asked Stan about the expense, he became somewhat agitated: "I didn't hire you to ask questions. Just get the statements done. Everything is in order."

 

You feel uncomfortable with Stan's response, and you decide to write an email to the engagement partner.

Explain your concern and provide a recommendation on how to deal with the situation?