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CPA Report Memo

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As the CPA for a large organization, your manager has asked you to provide information to outside CPAs who are examining a subsidiary that has been set up as a corporation. As part of their review, the CPAs have asked you to provide them with the following explanations:

- The methodology used to determine deferred taxed
- The procedures for reporting accounting changes and error corrections
- The rationale behind establishing the subsidiary as a corporation

And the manager also ask you to tell her what your professional responsibilities as a CPA and the difference between a review and an audit as the CPA.

596 words plus 5 references

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TO: CPA Examining a subsidiary;
FROM: CPA
DATE: December 8, 2010
SUBJECT: Explanations:

The following gives an explanation about the methods used to determine deferred taxes, the procedure to report accounting changes, and the rational behind establishing the subsidiary as a corporation.
The method used to determine deferred tax liability is to examine the depreciation. If there is accelerated depreciation the excess depreciation causes deferred taxes. Further, I there is any asset in the company books which has a higher book value than tax basis, there is a deferred tax liability. The deferred taxes reported represent temporary differences between the stated value of an asset/liability for tax purposes and the value for financial reporting purposes. Specifically these are accounted in accordance with US GAAP (SFAS 109).
The method used to report changes in adoption of generally accepted principle different from the one used before is hat financial statements for prior periods included for comparative purposes will be presented as previously reported (2). The cumulative effect of changing to new accounting principle based on the net earnings ...

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