Dr. Smith is the CEO of the Get-Well Corp. He is a leader in biotechnology science, and is revered by his peers. He owns 10 % of the company's outstanding shares. He would like to borrow $500,000 from the Get-Well Corp. His CFO, Ms. Daily is directed to prepare a corporate check for $500,000 which he deposits in his personal account. At year end, the independent auditor sees this transaction in the cash disbursements journal. You have learned that Dr. Smith intends to submit the audited report to a firm considering a merger with Get-Well Corp. How would you advise the auditor to handle this transaction?
Dr. Smith is the CEO of the Get-Well Corp. He is a leader in biotechnology science, and is revered by his peers. He owns 10 % of the company's outstanding shares. He would like to borrow $500,000 from the Get-Well Corp. His CFO, Ms. Daily is directed to prepare a corporate check for $500,000 which he deposits in his personal account. At year end, the independent auditor sees this transaction in the cash disbursements journal. You have learned that Dr. Smith intends to submit the audited report to a firm considering a merger with Get-Well Corp. How would you advise the auditor to handle this transaction?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Dr. Smith is the CEO of the Get-Well Corp. He is a leader in biotechnology science, and is revered by his peers. He owns 10 % of the company's outstanding shares. He would like to borrow $500,000 from the Get-Well Corp. His CFO, Ms. Daily is directed to prepare a corporate check for $500,000 which he deposits in his personal account. At year end, the independent auditor sees this transaction in the cash disbursements journal. You have learned that Dr. Smith intends to submit the audited report to a firm considering a merger with Get-Well Corp. How would you advise the auditor to handle this transaction?
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