Case Study Analysis: Jones and Jones CPA (Case located at the end of Chapter 3)
Knowing how to analyze a case will help you attack virtually any business problem. A case study helps you learn by immersing you in real-world business issues and makes you a decision-maker. A case presents facts about a particular organization, and you must focus on the most important facts and use the information to determine the best (of multiple alternatives) course(s) of action to deal with the problems you identify.
A case study analysis must not just summarize the case; it should identify key issues and problems, and outline and assess alternative courses of action.
In this case, you will have an opportunity to analyze the independence of Certified Public Accountants. You will analyze the business evaluation services and consulting engagements that can or cannot be performed by a CPA and independence still exists.
Jones and Jones, CPA, has a manufacturing client, Widgit Technologies, Inc. (WTI), that is a small, owner-managed business with annual revenues of approximately $8 million. WTI employs a bookkeeper but is not large enough to employ a CPA in-house. WTI regularly asks Margaret Jones, the partner on the engagement, for advice on accounting issues, and Jones and Jones drafts the financial statements for the company. The client reviews the financial statements before they are printed by Jones and Jones with an audit opinion attached.
During the current year WTI asked Jones and Jones to assist the company by rendering a business valuation service. WTI is asking Jones and Jones to (1) estimate the value of WTI and (2) consult with the WTI in the form of making recommendations on steps that WTI can take that will grow the value of the business.
Provide a 3- 4-page report answering the following questions:
1. Since Jones and Jones is preparing the financial statements for WTI, is Jones and Jones independent with respect to WTI? What conditions, if any, must Jones and Jones meet in order to be independent with respect to WTI?
2. Would your answer to (1) be the same if WTI was a public company subject to SEC rules and regulations?
3. Can Jones and Jones take on the business valuation services and consulting engagement and remain independent with respect to WTI? Explain your reasoning.
4. Would your answer to (3) be the same if WTI was a public company subject to SEC rules and regulations?
5. Make sure your document includes:
- Your name
- Date
- Course name and section number
- Unit number
- Case name
- Page numbers