Sean Clem Has Done a Review Engagement and Prepared the Tax

question 59

Essay

Sean Clem has done a review engagement and prepared the tax return for your web design business for the last five years.The books and records have always been well organized,although year-end adjusting entries have been required.You do some of the accounting yourself and the rest of the accounting records are handled by your spouse,who is also an employee of the business.
This year,you would like to expand your business to provide ISP (internet service provider)services to your clients.This would involve purchasing additional computer equipment and software.You are also considering hiring an additional employee (you currently have three),and you are looking at obtaining a loan for $100 000 from the bank.The bank says that you should have your records audited,but you are not sure what this will mean.
Required:
What would Sean say to you about the differences between an audit and a review?

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Definitions:

Amtrak

The National Railroad Passenger Corporation, offering intercity passenger train service in the United States.

Publicly Owned

Pertains to assets, properties, or businesses that are owned and operated by governmental entities.

Private Company

A business entity owned by private individuals or entities and is not traded publicly on the stock market.

Natural Monopoly

A market condition where due to high infrastructure costs or significant barriers to entry, a single company can supply a product or service more efficiently than any potential competitor.