ACCT 4750 WINTER 2021
ASSIGNMENT 1
Due Date March 16, 2021
QUESTION 1 (10 marks)
You are having lunch with a former employee of your accounting firm, a friend of yours.
Diane was laid off last year when she had failed to pass her professional examinations
for three years in a row. Diane told you that she finally managed to obtain a CPA
designation in the past year and has started her own public accounting firm.
She has been circulating flyers and electronic email announcements with fixed rates:
$800 for a compilation engagement, $2,000 for a review, and $6,000 for an audit where
revenues are less than $1 million, $15,000 for an audit for a client with revenues up to
$5 million. She already has clients to keep her busy for the next six months. She even
has some feelers for clients that she personally handled while she was working for your
firm — there were a lot of contacts developed during the five years that she was
working there! To help attract some of the larger clients, she is considering not charging
any fee for the first ten hours spent on tax-related services.
Diane ended the conversation by asking you if you would like to join her in her new
firm, because at this rate she’ll need a second person real soon!
Required:
