CASE ANALYSIS 002

ASSUPRIN

The dramatic changes in the economic and political dimension of the Philippines have
caused a bit of temporary financial difficulty to LABAN ng mga ASTIG Firm, one of the
biggest auditing firm in the country. During the six-month period, the Firm has lost 3 major
clients. It costs them more than P95,000,000.00. On August 1, 2016, MARAMINGPERA
Corporation asked LABAN ng mga ASTIG to audit their 2016 financial statement which
the management intends to release on the 14th day of April 2017. The latter corporation
is willing to pay P100,000,000.00 for the proposed engagement.

The Firm has conducted the necessary pre-engagement procedures. It was noted therein
that BIDA Firm was the predecessor auditor. Communication with the latter has been
concluded.

After a heated deliberation as to the matter of accepting or rejecting the engagement, it

was decided that KBT MALAINSE AHAS, CPA is the partner-in-charge for the audit
engagement with MARAMINGPERA Corporation.

PERTINENT INFORMATION:

MARAMINGPERA Corporation is a parent of 10 subsidiaries. The operation of the

Corporation as well as its subsidiaries is diversified.
During the meeting conducted with BIDA Firm, one of their audit managers has
accidentally uttered "naku, ang daming kelangan linisin sa books nila".
On February 3, 2017 one of the major customers of the client has filed a bankruptcy
due to its inability to recover after a wild fire destroyed their power plants in Ilocos
Norte.
On March 8, 2017, a litigation against the client was decided by the RTC in favor
of the opposing party. The Firm proposed an adjusting journal entry amounting to
P30,000,000.00 to correct the recorded amount of Provision for Litigation Expense
 but the management refused on the ground that they will still be filing an appeal to
the CA.
After a thorough examination of the client's bank accounts, it has been noted that
an amount of P150,000,000.00 has been floating from one bank to another from
November 2016 to January 2017.
The client has a pending case in the CTA in relation with the assessment sent by
the BIR last May 2016. The amount in the assessment is P80,000,000.
One of the Firm's audit staff has submitted a working paper showing a material
difference between the balance per book and the balance per audit of the
Creditable Withholding Taxes Account. ( See File CWT)

Instruction:

Each Group shall assume the position of LIGA ng mga ASTIG Firm. Present all the
necessary things to be done applying all the concepts from the pre-engagement
procedures down to the Codes of Professional Ethics. The case is a simulated scenario
in the corporate world, and it is with this that extensive research is a major factor.

LIFE IS NOT ABOUT FINDING YOURSELF. LIFE IS ABOUT CREATING

YOURSELF.
-George Bernard Shaw