1.
Please be detailed in your answer.
You are one of three partners who own and operate Marys Maid Service. The company has been
operating for seven years. One of the other partners has always prepared the companys annual
financial statements. Recently, you proposed that the statements be audited each year because it
would benefit the partners and prevent possible disagreements about the division of profits. The
partner who prepares the statements proposed that his uncle, who has a lot of financial
experience, can do the job at little cost. Your other partner remained silent.
Required: What position would you take on the proposal? What would you strongly recommend?
Solution
The proposal should be opposed and not to be accepted. The proposal should be strongly
protested, since the auditor is a relative of a partner and the auditing work could have been
biased.
An independent auditor having no interest on the firm should be recommended for appointment.
Otherwise the conspiracy or embezzlement may happen.