Remco Gourmet Water Company produces and distributes bottled water in a variety of natural flavors. Jan Cancel, a partner in a local CPA firm, is conducting the first-time-ever audit of Remco. On the second day of her audit, she discovers that the CEO has acquired a large-screen television, a speed boat, and a Jacuzzi for his personal use.
All three items were delivered to the CEO's personal residence, and they were booked into the accounting records as consulting expenses. Jan examined Remco's most recent federal tax return and noticed that the items had been included in deductible consulting expenses. a. What should Jan Cancel do about her finding? b. What impact should the finding have on how she proceeds with the audit? c. What impact should the finding have on her audit opinion report?