1. You have been asked by a long-term friend to fill a vacancyon the five-person board of trustees for a small private company.The company’s principal asset is a banana plantation located on aremote South Pacific island. Your friend is the sole manager of thecompany which was organized as a trust for the benefit of her andher two brothers, who are also members of the trust’s board. Theonly other trustee director is the company’s long-time chiefaccountant.
Before making your decision, you made inquiries about thecompany’s financial reporting practices. You learned thefollowing:
• The company’s annual financial statements were not audited byan independent certified public accountant. The trustees believedthe benefits of audited financial statements were not worth thecost.
• The company’s fiscal period ran from January 1 to December31.
• A full set of semiannual financial statements was preparedeach year for the six-month period ending June 30. Like the annualfinancial report, they were available approximately two to threemonths after the close of the accounting period.
How might the information you learned about the financialreporting practices influence your decision to join the board oftrustees?
