Marsha Thompson is an accountant for a local manufacturing company. Marsha\'s go

Question

Marsha Thompson is an accountant for a local manufacturing company. Marsha's good friend Rolando Noble has been operating a retail sporting goods store for about a year. The store has been moderately successful, and Rolando needs a bank loan to help finance the next stage of his store's growth. He has asked Marsha to prepare financial statements that the banker will use to help decide whether or not to grant the loan. Rolando has purposed that the fee he will pay Marsha's accounting work should be contingent upon his receiving the loan. What factors should Marsha consider when making her decision about whether or not to prepare the financial statement for Rolando's store?

Explanation / Answer

The following factors ought to be considered by Marsha while taking a decision about whether or not to prepare the financial statement for Rolando's store:

1. Whether Ronaldo has been keeping the books of accounts of the store properly and whether these are kept updated;

2. Whether the books of accounts of Ronaldo's sore depict a "true and fair " view of the state of affairs thereat;

3.Whether Ronaldo's store has been filing the tax returns faithfully;

4. Whether the tax assessments of Ronaldo's store are upto date;

5. Whether Ronaldo's business is above board or not and whether the store does any illegal business;

6. Whether Ronaldo has invested his own capital in business or not and whether the store is running its business on credit received from suppliers;

7. Whether Ronaldo's store has been keeping its financial coomitments in the past and whether there is a history of defaults;

8. Whether there has been any return/bouncing of cheks in the past and whether the suppliers have been paid in the past as per the agreed credit terms;

9. Whether Marsha is being requested to hide certain things that should come out in the financial statements ;

10. Whether Marsha is being asked to present a rosy picture of the state of affairs which does not conform to the actual state of affairs etc.

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