Write a Response That Addresses Your Client's Questions

October 18, 2011

Derek Williams

Ops Manager, Corelogic. Inc.

From : Shelly Resendez

Audit Staff, Price Waterhouse LLC.

Subject: Audit

In regards to the audit being performed on your company’s year ended December 31, 2010 financial statements certain items came up and we will need to review certain transactions that have to deal with adjusting lower cost of market, capitalizing interest on building construction, recording a gain or a loss on asset disposal and adjusting goodwill for impairment.

In adjusting lower cost of market inventory on valuation the auditors are in need of determining how Corelogic determines the cost of its inventories and the current market cost through adjusting entries. These entries involve the Allowance to Reduce Inventory and Loss from Reducing Inventory. Making sure the policies of Corelogic in determining the value of its inventory should be in compliance accrual basis of accounting in regards to generally accepted accounting principles.

Capitalizing interest on building construction:

Generally accepted accounting principles require capitalizing actual interest with modification on interests’ costs during construction. All costs incurred should bring the asset to its intended use. The audit team wants to look at the previous year’s financial statements in order to see if Corelogic’s building assets are accurately presented and recorded.

Recording gain or loss on asset disposal:

A gain or loss must be recognized when selling a long term asset. The auditors are in need of reviewing the previous financials in order to determine that gains or losses were recognized properly.

Adjusting goodwill for impairment:

According to Huefner and Largav (2004), “The New Accounting Treatment of Goodwill-SFAS 142 made two major changes to goodwill accounting:

* Amortization of all goodwill ceased, regardless of when it originated. Goodwill is now carried as an asset without reduction for...