A) One Step in the Planning Phase of an Audit

question 19

Essay

A) One step in the planning phase of an audit is to obtain information about the client's legal obligations. Identify the types of legal documents and records that auditors examine to obtain this information.
B) Discuss the audit-relevant information contained in each of these three types of documents that an auditor should be aware of early in the audit.

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Definitions:

Taxable Income

The portion of income subject to taxes after adjustments, deductions, and exemptions are applied to gross income.

FMV

The fair market value, or the price that property would sell for on the open market between a willing buyer and a willing seller.

Complete Liquidation

The process of closing a business by selling all assets, paying off creditors, and distributing any remaining assets to shareholders or owners.

Basis

The amount of investment in property for tax purposes, used to determine the gain or loss on the sale, exchange, or other disposition of the property.