70.2K

Verified Solution

Link Copied!

Client shopping for accounting services (19 marks) You are the manager for a new manufacturing audit client; Plastiflexx Inc. Plastiflexx produces recycled resin products such as storage containers, pet food bowls, etc for a number of retailers. The company experienced substantial growth in the past few years and is now planning to expand its operations. Management of Plastiflexx is looking into going public within the next two years. In the past, Plastiflexx Inc. has used a small CPA firm to prepare financial statements for a local bank. Richard L, the owner of Plastiflexx, has been looking to hire a new CPA firm and one of his business colleagues told him that there are different types of reports that an accounting firm can provide and that a "good" opinion is not guaranteed. Richard is unclear about what this means. He thought that he could buy the accounting report he wanted. The audit partner for Plastiflexx Inc. has asked you to provide some background information for his response to Richard's questions. Required: 1. What types of assurance engagement (provide possible types) and what would you recommend for this client? Explain why you selected this type of engagement (4 marks) II. Explain why the audit partner cannot guarantee a "good" opinion on Plastiflexx Inc. financial statements (5 marks) III. Explain the difference between an auditing deficiency reservation and accounting deficiency reservation and the resulting report(s) for each. Also, provide ONE example of each type of deficiency. (9 marks) Client shopping for accounting services (19 marks) You are the manager for a new manufacturing audit client; Plastiflexx Inc. Plastiflexx produces recycled resin products such as storage containers, pet food bowls, etc for a number of retailers. The company experienced substantial growth in the past few years and is now planning to expand its operations. Management of Plastiflexx is looking into going public within the next two years. In the past, Plastiflexx Inc. has used a small CPA firm to prepare financial statements for a local bank. Richard L, the owner of Plastiflexx, has been looking to hire a new CPA firm and one of his business colleagues told him that there are different types of reports that an accounting firm can provide and that a "good" opinion is not guaranteed. Richard is unclear about what this means. He thought that he could buy the accounting report he wanted. The audit partner for Plastiflexx Inc. has asked you to provide some background information for his response to Richard's questions. Required: 1. What types of assurance engagement (provide possible types) and what would you recommend for this client? Explain why you selected this type of engagement (4 marks) II. Explain why the audit partner cannot guarantee a "good" opinion on Plastiflexx Inc. financial statements (5 marks) III. Explain the difference between an auditing deficiency reservation and accounting deficiency reservation and the resulting report(s) for each. Also, provide ONE example of each type of deficiency. (9 marks)

Answer & Explanation Solved by verified expert

See Answer