The format of your submission should be: 1. Title Page with your name, date, cou

The format of your submission should be:
1. Title Page with your name, date, course number and case number
2. Identify each section of submission with a paragraph heading followed by
your narrative response
a. Brief Summary of Case
b. Each Case Requirement
3. Your narrative should be 1 to 2 double-spaced pages
4. Your narrative must be substantiated by 1-2 reference sources
a. These sources can be from our text and/or outside sources
5. A reference page identifying citations from your sources must be included.
Case Description:
Smith & Co., a local Dallas public accounting firm, is incorporated as a professional
corporation, with three shareholders, all CPAs. The shareholders have developed a
combination of marketing, software, and professional expertise that has allowed
them to perform the accounting service of compiling individuals’ personal financial
statements in an extremely efficient manner.
The three shareholders are interested in “going national” with their accounting
service but lack the capital necessary to expand to other cities. They are currently
considering the possibility of obtaining outside capital as a way to expand their
business by offering their firm’s services to individuals in other markets. They
estimate that if they raised $4 million of capital, they could open and staff 15
offices within the next 12 months.
In a recent meeting of the three shareholders, the possibility of raising the capital
through incorporation as a traditional corporation and thereby selling stock to the
public was discussed. The original three shareholders would retain 51 percent of the
total stock, which would be traded over the counter. The only work performed
through the new corporation would be the compilation of individuals’ financial
statements.
Subsequently, the shareholders were dismayed to learn that states do not generally
allow CPAs to practice as a traditional corporation. Also, those states that do allow
“limited liability companies” generally require that shareholders be involved in
public accounting. Only by establishing a separate organization not held out as a
public accounting firm will the current three shareholders be allowed to follow their
expansion plan.
Requirements:
1. Summarize the arguments for allowing public accounting firms to sell
ownership interests to individuals not in public accounting through
incorporation as a traditional corporation.
2. Summarize the arguments in favor of restricting public accounting firm
ownership to those involved in public accounting.
3. Express your personal opinion as to whether ownership of public accounting
firms should be restricted to individuals involved in public accounting.