Do you retain the independence to audit zohank company

Assignment Help Business Law and Ethics

Reference no: EM133194229 , Length: 1 page

Question 1: While acting as a fiduciary, you recommended that your client buy a particular brand of refueling station to charge her new, electricity-powered car. You told your client that she would be able to save 70% of the purchase price of the home refueling station through a combination of tax credits and utility rebates. You were correct, and the client achieved these savings. However, you did not tell the client that you were receiving a $200 commission from the manufacturer of that particular refueling station brand. Your client now is furious that you received this commission and never told her about it. Do you owe your client $200?

Question 2: You recently introduced your wealthy client Grace to a broccoli importer named Gonzalo. You told your client that she would likely "get along well" with the broccoli importer because they both were entrepreneurial and they both were raised in Guatemala. You also told your client to strongly consider investing with the broccoli importer because he was a "stand-up guy." After several business discussions between Grace and Gonzalo, Grace invested $5 million in Gonzalo's business. Several months later, a fierce hurricane destroyed the broccoli importer's crop, causing the company to cease its operations. Grace now has sued you for breach of fiduciary duty. Are you liable?

Question 3: A trustee of a split-interest trust has to allocate income to the income beneficiary and principal to the remaindermen. The trustee recently used $20 million of the trust's assets to purchase a zero-coupon bond in a very safe company. The effective annual yield on this bond is 8%. Zero-coupon bonds are purchased at a deep discount and provide the full face value to an investor in cash on the maturity date of the bond. a. As the accountant for this split-interest trust, would it be important for you to read the trust document? Why? b. Do you have to do any research to perform your task properly? c. How should the annual appreciation in the maturity value of this bond be accounted for? d. How much cash income will this bond generate for the income beneficiary in the first year of ownership? e. Has the trustee breached a fiduciary duty?

Question 4: You are the auditor for Q Company, and you also serve as the trustee of a trust that owns some shares of Q Company stock. According to trust documents, you are prohibited from making investment decisions for the trust. Furthermore, the trust owns a diversified portfolio of 100 stocks in large, publicly traded companies. No stock accounts for more than 2% of the trust's net worth. Does your position as trustee impair your independence to audit Q Company?

Question 5: During the past two years, you audited the financial statements of many clients, including Zohank Company. After one of your individual clients had a stroke, she created a living trust and appointed you as the trustee. According to the trust documents, you may disburse "funds on behalf of the grantor to adequately satisfy her medical needs." You may not, however, alter the trust's investment portfolio. The trust's total investment portfolio is worth $1 million and is comprised of five different stocks, each of which represents 20% of the value of the trust's assets. Zohank Company common stock is one of the five stocks held in the trust's portfolio. Do you retain the independence to audit Zohank Company?

Reference no: EM133194229

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