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Barbados Spirits Inc.
Author(s) -
Kalesnikoff Douglas K. S.
Publication year - 2015
Publication title -
accounting perspectives
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.238
H-Index - 17
eISSN - 1911-3838
pISSN - 1911-382X
DOI - 10.1111/1911-3838.12087
Subject(s) - accounting , business , audit , shareholder , auditor independence , tax haven , tax planning , income tax , tax avoidance , finance , joint audit , double taxation , public economics , economics , internal audit , corporate governance
This case focuses on the audit of a subsidiary in Barbados of a Multi‐National Entity (“ MNE ”), a distiller in Toronto. The MNE is a large and important international client to the accounting firm. The firm provides both tax advisory and audit services to the MNE . The MNE , following advice of the accounting firm, has utilized an offshore related party to structure transactions that avoid taxes in Barbados. These related party transactions are a detriment to the interests of critical users of the financial statements, namely the minority shareholders and the tax authorities of Barbados. The auditor is now faced with evaluating the adequacy of the related party note disclosure and the completeness of the income tax provision. Independence issues of a self‐interest threat (importance of the client) and self‐review threat (evaluating the adequacy of the income tax provision based on tax advice provided by the firm) are explored.