You are a CPA in a regional public accounting firm that has ten offices in three states. Mr. Shine has approached you with a request for an audit. He is the president of Hitech Software and Games Inc., a five-year-old company that has recently grown to $500 million in sales and $200 million in total assets.

You are a CPA in a regional public accounting firm that has ten offices in three states. Mr. Shine has approached you with a request for an audit. He is the president of Hitech Software and Games Inc., a five-year-old company that has recently grown to $500 million in sales and $200 million in total assets. Shine is thinking about going public with a $25 million issue of common stock, of which $10 million would be a secondary issue of shares he holds. You are very happy about this opportunity because you know Shine is the new president of the Symphony Society board and has made quite a civic impression since he came to your medium-size city seven years ago. Hitech is one of the growing employers in the city. Referencing this week’s lecture, respond to the following:

Discuss the sources of information and the types of inquiries that you and the firm’s partners may make in connection with accepting Hitech as a new client.

Do professional audit standards require any investigation of prospective clients? Why or why not?

Suppose Shine also told you that ten years ago his closely-held hamburger franchise business went

bankrupt. Upon investigation, you discover from former auditors (your own firm in another city) that Shine was fraudulent in its application of franchise-fee income recognition rules and presented such difficulties that your firm resigned from the audit (before the bankruptcy). Do you think the partner in charge of the audit practice should accept Hitech as a new client?

Respond to at least two of your classmates’ posts.

DQ2 Social Media’s Phony Accounting in Forbes [CLOs: 1, 4, 5]. 1st Post Due by Day 3. Read the article by

McKenna (2012), Social Media’s Phony Accounting, and answer the following questions:

The author believes there are independence issues with the auditors in this case with Ernst and Young and various social media companies. Do you agree or disagree? Please provide facts from the article to support your position.

What revenue recognition options are available to Zynga?

Has technology changed the way revenue should be recognized?

As an auditor, would you agree with E&Y’s position on revenue recognition or should it be changed?

Support your position with facts. Respond to at least two of your classmates’ posts.

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