You are a manager working in the Technical Department of GPKM, alarge partnership which...

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Accounting

You are a manager working in the Technical Department of GPKM, alarge partnership which offers audit and other financial services.Jade Frances has been referred to you, as she requires adviceregarding Yobro Ltd, a new company that she is in the process ofstarting up. She is planning to list the company on the New ZealandStock Exchange, as future operations will depend upon a successfuloffer of shares to the public. She will be seeking to raise $75million in capital to fund the acquisition of the assets thecompany will require. Current expressions of interest indicate thatthe company will have at least 500 shareholders. Jade would like toclarify what statutory and corporate governance requirements thenew company will need to comply with. In particular, she would liketo check on some details regarding reporting and auditrequirements. She understands that companies are required to haveauditors, who in turn are required to prepare annual reports but isnot sure what company records are required for this. Jade has alsobeen told that it will be important to good governance to set up anaudit committee. She assumes it will consist of members of youraudit firm, but has asked if you can clarify what an auditcommittee is and what it does.
Required:
Provide answers to Jade’s questions, which are set outbelow:
a) Identify the main four New Zealandstatutes concerning external reporting, with which Yobro Ltd willneed to comply and explain why this isso.
b) Explain whether Jade’s understanding of statutoryrequirements regarding auditors and annual reports are correct, inparticular: i) State and explain whetherYobro Ltd is required to have an auditor and, if so whether optionsor exemptions from this requirement exist which they may use.
ii) State who is responsible forensuring that the preparation of annual reports occurs and how longthey will have within which to do so.
c) Briefly explain what an auditcommittee is and what it does. Your explanation should includereference to best practice as to how it operates, as well as atleast three points concerning each of the following:
i) Requirements relating to members/composition of the auditcommittee;
ii) Purposes and responsibilities of the audit committee.

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A radical revamping of the partnership audit rules will impact every partnership and LLC taxed as a partnership starting in 2018 Although mandatory compliance is nearly two years awayand many unknowns existnow is the time to begin to educate clients review business structures and amend partnership and operating agreements in preparation for the impact Current Law TEFRA and ELPs In 1982 TEFRA changed the partnership tax audit landscape by shifting the focus of a partnership audit from the individual partner returns to the partnership return This eliminated the inconsistencies that had plagued the process when each partners return was examined individually with the partnership itself merely an addendum to the process However any adjustments passed through to the partners returns keeping collection at the partnership level TEFRAs approach became increasingly unwieldy as the number of large partnerships grew Legislative and administrative tinkering attempted to reduce administrative headaches and speed revenue collection As a result currently there are three audit procedures for partnerships and LLCs taxed as partnerships For 10 or fewer partners Audits are at the partner level much as was the case preTEFRA For 10 to 99 partners The TEFRA procedures apply The partnership return is the focus of the audit any adjustments are binding on the partners who must file amended returns for the year under audit For 100 or more partners TEFRA applies unless the partnership is one of the very few that opted to be an ELP If the ELP rules apply the focus is the partnership return but any adjustments are taken into account on the partners current year returns rather than the amended prior year returns New Law PartnershipLevel Liability The rules under the Bipartisan Budget Act break new ground in passthrough taxation While the audit focus continues to be on the partnership return the approach to adjustments and payments is radically different Once the law is in effect Required adjustments are taken into account at the partnership levelnot by the individual partners Adjustments are reflected in the year the audit is completed or subsequent court proceeding is concluded not the year under review The IRS will collect the assessed amount plus penalties and interest from the partnershipnot the individual partners These new provisions transform a passthrough entity into a taxpaying entity with respect to adjustments arising on audit Plus the economic impact falls on partners in the adjustment year not those in the year under review If the partners have changed those who pay the price may be different from those who reaped the benefit There are options that enable the partnership to pass the adjustments through to the partners However short timeframes for making the election and increased interest rates are among the factors that limit the desirability and utility of this option Optout for Small Partnerships Partnershiplevel audits and See Answer

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