Case Study Question: Please provide facts, issues, conclusion, and authorities &
ID: 2472281 • Letter: C
Question
Case Study Question: Please provide facts, issues, conclusion, and authorities & application.
Hugo Crossman, CPA, issued a review statement for the CUNY Company for last year and a compiled statement for them in the current year. During the current year, Hugo purchased some CUNY securities, which made him lose his independence—a fact noted in his CPA compilation report. Now, the CUNY Company management wants Hugo to issue comparative two year financial statements (last year and this year). Can Hugo re-issue his review report now that he is no longer independent of the CUNY Company?
Explanation / Answer
Facts: Mr Hugo is a CPA, and issued a Complied statement of CUNY company. He invested in the securties of his client CUNY company. Now CUNY wants him to issue Comparative statement.
Issues: independence of CPA Mr Hugo
Authorities and Application: ET section 100- Independence, Integerity and Objective. 101- independence, 102- Integerity and Objective and ET section 191 Ethics ruling on Independence, Integerity and Objective.
conclusion: Mr Hugo is impaired due to invest in the security of CUNY, which he has already diclosed in his CPA Compilation Report. If a covered member hold material investment in the securities of his client, independence would be considered to be impaired.
In that case any member is not allowed to sign , attest any document relted to the financial statement of this client. However a memebr can sign, reissue any statemetn or report issued by him when he was independed subject to the provision that he made a disclosure of such interest and fact of nonindependence in such statement and report.
Since Mr hugo is asked to issue two years comparative fiancial statement, kepping the fact in the mind that:
- For the first year he has issued complied statement but not for the current year.
He is not allowed by the above rules as his indenepdence is impared in the current year or say before issuing final statement.