Specific auditing and accounting problems

Reference no: EM1354218

Sunny Energy Applications Co. sells solar-powered swimming pool heaters. Sunny contracts 100 % of the work to other companies. As Sunny is a new company, its balance sheet has total assets of $78,000 including $24,000 of "stock subscriptions receivable." The largest asset is $42,000 worth of "un-recovered development costs." The equity side of the balance sheet is made up of $79,000 of "Common Stock Subscribed."

The company is contemplating a public offering to raise $1 million. The shares to be sold to the public for $1 million will represent 40 percent of the then issued and outstanding stock. There are two officer-employees of the company, Mike Whale and Willie Float former officers of Canadian Brass Co. Flat is being sued by the SEC for misusing funds raised by Canadian Brass I a public offering. The funds were used as compensatory balances for loans to a Physics Inc. was controlled by Float and is the predecessor for Sunny Energy Applications.

Canadian Brass is being sued by the SEC for improper (exaggerated) income. Float was chief executive at the time. Many organizations are engaged in researching the feasibility of using solar energy. Most of the organizations are considerably larger and finance stronger than Sunny Energy. The company has not been granted and patents that would serve to protect it from competitors.

1) What potential risks may be present in this engagement?

2) What specific auditing and accounting problems appear to exist?

3) What additional information do you feel you need to know about the company?

4) Do you believe the engagement should be accepted or rejected? Why?

Reference no: EM1354218

Questions Cloud

What horizontal distance does it cover during its flight : A seed shoots out from the pod with the speed of 2.6m/s but with a direction of motion 30° below the horizontal. The seed pod is initially 1.1m above the ground.

Bank panic and related issues : Does the fact that your bank keeps only a fraction of your account balance in reserve make you uncomfortable? Why don't people rush to the bank and retrieve their money? How do banks prevent panics from occurring?

Elucidate value of money and compute optimal pricing scheme : Ignore the time value of money and compute the optimal pricing scheme of the iphone, Suppose that there are equal numbers of each customer type, and that the MC of the iphone is $100.

Fmc aberdeen and green river organizational structure : FMC Aberdeen and Green River Organizational Structure/Culture - Prepare an organizational analysis for Kenneth Dailey, site manager for FMC Corporation's Green River, Wyoming facility.

Specific auditing and accounting problems : What potential risks may be present in this engagement? What specific auditing and accounting problems appear to exist? What additional information do you feel you need to know about the company? Do you believe the engagement should be accepted or re..

Reason for problem encounter in deleting path variables : Discuss some of the problems he may soon encounter and explain the reasons for these problems. How could he easily return path to its original value?

Calculate the net cash flow : Company X is planning to estimate the 1st year net cash flow for a proposed project. The financial staff has collected the following information on the project:

Roles of judge and coach : Do you agree that the roles of judge and coach are incompatible? Why or why not?

Explain how is structure related to the organizations need : Organizational structure - Explain how is structure related to the organization's need for efficiency versus its need for learning and innovation

User Account

All Pages