Research and Discussion Case: Smith & Company

Satisfactory Essays
Case Test 1, Case 1-39

Research and discussion case: Smith & Company
a. The following view can be prepared for permitting public accounting firm to sell their ownership interest to individuals not in public accounting from incorporation:
1) Assessing capital in the economy is enhanced which makes the allocation of scarce resources efficient within the economy.
2) Since public accounting firm participate against companies that are permitted to get in a certain manner, they must not be constrained to capital accessible from accountants and loans.
3) The certified public accountants (CPAs) own 51 percent stock, which restricts any probable negative effects on the quality of the service that might have resulted from non-accountant participation.
4) From the view point of the public accounting firm, the likelihood of liability that is restricted to corporate assets is appealing.
5) CPAs compete globally, and they do not serve the interest of this country to restrain their capacity to get capital.
b. The following arguments are in favor of restricting public accounting firm ownership to those involved in public accounting:
1) Professional nature of the service involved might be affected adversely, as shareholders put pressure on the auditors which adversely affects their work quality.
2) Any restrain on personal liability might adversely affect those affected by careless performance by the company.
3) By restricting public accounting firms to a sole practitioner, partnership, and professional presentation by the firm.
4) By restricting public accounting firms to partnership, sole practitioner, and professional corporation status, they have benefitted the public over the years, and appears to be the only restricted advantage allowed to public ownership.
c. There is no specific answer as few states presently permit traditional incorporation under any situation. Through, the traditional ability of auditors to get sufficient capital make us consider the

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