Week 1 CPA Memo - Internal Memo Memo To: Manager From: Lien...

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Internal Memo
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Memo To: Manager From:Lien Bach CC: Date: 07:33:04 Re: A summary of CPA’s responsibilities As the CPA for a large organization, your manager has asked you to provide information to outside CPAs who are examining a subsidiary that has been set up as a corporation. As part of their review, the CPAs have asked you to provide them with the following explanations: o The methodology used to determine deferred taxes o The procedures for reporting accounting changes and error corrections o The rationale behind establishing the subsidiary as a corporation Prepare your response to the three questions. Before submitting your response, your manager would like to know a little bit more about the request. She has asked you to tell her what your professional responsibilities are as a CPA, and the difference between a review and an audit. Provide draft responses to the above questions. Additionally, provide your manager with a summary of your responsibilities in an internal memo (no more than 1,050 words) You requested that I provide the external CPAs answers to questions about deferred taxes, accounting changes and error corrections, and establishing the subsidiary as a corporation. Additionally, you requested information about my professional responsibilities as a CPA and the difference between a review and an audit. The brief contains answers to those questions as below. The methodology used to determine deferred taxes Deferred income tax is the differences between tax laws and accounting methods can result in the amount of income tax payable by a company . Often, the difference between pre-tax accounting income and taxable income is called temporary differences. The difference results from items entering the income computations at different times. The differences are recorded as deferred tax asset or liability. According to SFAS 106, “A deferred tax liability or asset represents the increase or decrease in taxes payable or refundable in future years as a result of temporary differences and carry-forwards at the end of the current year.” First, deferred tax liability (DTL) is the amount of tax that the company would need to pay in the future. For example, the tax that company should pay is $100,000, but due to tax laws, the amount
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actually payable for this fiscal year is $85,000. The additional $15,000 would be a deferred income tax
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This note was uploaded on 03/06/2011 for the course ACC 545 taught by Professor Cole during the Spring '09 term at University of Phoenix.

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Week 1 CPA Memo - Internal Memo Memo To: Manager From: Lien...

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