certain non-audit services

Nowadays____certain limit should be set on____use of cars to reduce air pollution. A．/; the B．a; the C．the; / D．the; the

responsible for reviewing invoices raised to clients and for monitoring your firm’s credit control procedures. Several

matters came to light during your most recent review of client invoice files:

Norman Co, a large private company, has not paid an invoice from Smith & Co dated 5 June 2007 for work in respect

of the financial statement audit for the year ended 28 February 2007. A file note dated 30 November 2007 states

that Norman Co is suffering poor cash flows and is unable to pay the balance. This is the only piece of information

in the file you are reviewing relating to the invoice. You are aware that the final audit work for the year ended

28 February 2008, which has not yet been invoiced, is nearly complete and the audit report is due to be issued

imminently.

Wallace Co, a private company whose business is the manufacture of industrial machinery, has paid all invoices

relating to the recently completed audit planning for the year ended 31 May 2008. However, in the invoice file you

notice an invoice received by your firm from Wallace Co. The invoice is addressed to Valerie Hobson, the manager

responsible for the audit of Wallace Co. The invoice relates to the rental of an area in Wallace Co’s empty warehouse,

with the following comment handwritten on the invoice: ‘rental space being used for storage of Ms Hobson’s

speedboat for six months – she is our auditor, so only charge a nominal sum of $100’. When asked about the invoice,

Valerie Hobson said that the invoice should have been sent to her private address. You are aware that Wallace Co

sometimes uses the empty warehouse for rental income, though this is not the main trading income of the company.

In the ‘miscellaneous invoices raised’ file, an invoice dated last week has been raised to Software Supply Co, not a

client of your firm. The comment box on the invoice contains the note ‘referral fee for recommending Software Supply

Co to several audit clients regarding the supply of bespoke accounting software’.

Required:

Identify and discuss the ethical and other professional issues raised by the invoice file review, and recommend

what action, if any, Smith & Co should now take in respect of:

(a) Norman Co; (8 marks)

Fill in the blanks with the correct words or phrases from the word bank. rules-based approach ;broad-scale uniformity; FASB; principles-based approach; governing bodies 1GAAP is a _______________. 2 ____________design accounting standards. 3 Most European companies follow a _______________. 4 _________ is the organization that makes accounting rules in America. 5 Accounting standards providew ____________ among organizations.

A．Detailed guidance or rules encourage accountants to look for ways around the rules rather than trying to provide useful information．

B．Principles-based standard setting is less costly to undertake than rules-based standard formulation．

C．It is desirable to have all corporations in all countries using the same accounting practice

D．A conceptual framework for standard setting has demonstrated to encourage the greatest economic development．