QQuestionAccounting
QuestionAccounting
The firm of Harwood & Toole, CPAs, has been the auditor and tax return preparer for Tucker, Incorporated a nonpublic company, for several years. In the current year, the management of Tucker discharged Harwood & Toole from the audit and tax engagement because of a disagreement over a tax matter. Management of Tucker has not paid Harwood & Toole any of the current year's audit and tax fees. Another CPA firm has been hired and management of Tucker has requested that Harwood & Toole provide the following items:
Indicate which of the following items must be provided to management of Tucker by Harwood & Toole.
a. Accounting records of Tucker, Incorporated in the possession of Harwood & Toole.
Yes
No
b. Copies of adjusting entries prepared by the staff of Harwood & Toole.
No
c. A copy of Tucker's partially completed tax return prepared by the staff of Harwood & Toole.
Yes
No
d. Copies of Harwood & Toole's audit working papers from prior engagements.
Yes
No
e. Several consolidating entries prepared by Tucker, Incorporated and reviewed by Harwood & Tool
Yes
No
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Answer
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Step 1: Determine which items Harwood & Toole must provide based on professional standards and legal obligations.
As a CPA firm, Harwood & Toole is required to maintain the confidentiality of client information and only release it when authorized by the client or required by legal or professional standards. In this case, Tucker, Incorporated has requested certain items, and Harwood & Toole must provide those that are permissible and consistent with professional standards.
Step 2: Analyze each item to determine if it should be provided.
a. Accounting records of Tucker, Incorporated in the possession of Harwood & Toole. Yes, these records should be provided to Tucker, Incorporated, as they belong to the company and are necessary for the new CPA firm to continue the audit and tax engagements. b. Copies of adjusting entries prepared by the staff of Harwood & Toole. No, these records are internal documents of Harwood & Toole and not required to be shared with the client or a third party, as they are not considered client records. c. A copy of Tucker's partially completed tax return prepared by the staff of Harwood & Toole. Yes, this document should be provided to Tucker, Incorporated, as it is a work product that belongs to the client and is necessary for the new CPA firm to complete the tax return. d. Copies of Harwood & Toole's audit working papers from prior engagements. Yes, these documents should be provided to Tucker, Incorporated, as they are necessary for the new CPA firm to understand the basis of previous audit decisions and to plan the current year's audit engagement. However, Harwood & Toole should redact any confidential information related to other clients. e. Several consolidating entries prepared by Tucker, Incorporated and reviewed by Harwood & Tool Yes, these records should be provided to Tucker, Incorporated, as they are necessary for the new CPA firm to understand the consolidation process and perform the current year's audit engagement.
Final Answer
Harwood & Toole must provide the following items to Tucker, Incorporated: - Accounting records of Tucker, Incorporated in the possession of Harwood & Toole. - A copy of Tucker's partially completed tax return prepared by the staff of Harwood & Toole. - Copies of Harwood & Toole's audit working papers from prior engagements, with redactions as necessary. - Several consolidating entries prepared by Tucker, Incorporated and reviewed by Harwood & Toole. They should not provide: - Copies of adjusting entries prepared by the staff of Harwood & Toole.
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