week 6-Auditing a Publicly Trade Company

week 6-Auditing a Publicly Trade Company - 1 Auditing a...

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Auditing a Publicly Traded Company Team C Jenna Cao, Brandy Cecil, MaryAnn Hellein, and Hunt Holladay Financial Accounting Theory and Research ACC 541 Dr. Sonja Wilson November 26, 2010 1
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Memo To: Senior Auditor From: Jenna Cao, Brandy Cecil, MaryAnn Hellein, and Hunt Holladay CC: Sonja Wilson Date: November 26, 2010 Re: Auditing a Publicly Traded Company Generally Accepted Accounting Principles (GAAP) is a set of guidelines for companies to follow when preparing their financial accounting. As a team of the Staff I, we were assigned to evaluate both the share-based payment reporting and special purpose entities (SPE). We prepared an overview about what the team should be looking for to confirm that the company complying with the guidelines of the GAAP, share-based payment reporting, and special purpose entities (SPE). Client Consistent with GAAP. A special purpose entity is a partnership, corporation, trust, or joint venture that is created for a limited purpose and that is designed to benefit a single company. An asset transfer creates an SPE. The reason for Spa’s is to avoid reporting capital leases. For an SPE to qualify for non- consolidation on financial statements three things have to happen: - The transferred assets cannot be reached by the transferor and its creditors - Each transferee can pledge or exchange the assets and nothing stops the transferee from being able to pledge or exchange - The transferor does not have control over the transferred assets by an agreement that entitles the transferor to repurchase or redeem the transferred assets before maturity or the ability 2
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to cause the holder to return specific assets The Federal Accounting Standards Board requires consolidation if the special purpose
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week 6-Auditing a Publicly Trade Company - 1 Auditing a...

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