TAILIEUCHUNG - Uniform Audit and Accounting Guide: For Audits of Transportation Consultants’ Indirect Cost Rates

A controlling owner in this situation could extract wealth from the firm, receive the entire benefit, but only bear a fraction of the cost. We offer a simple pyramidal structure to illustrate this point. An entrepreneur owns 25% of the stock in publicly traded Firm A, which in turn owns 32% of the stock in Firm B. In the most modest scenario, we note that the entrepreneur controls 25% of Firm B -- the weakest link in the chain of voting rights. At the same time, the entrepreneur owns about 8% of the cash flow rights of Firm B, the product of the two ownership stakes. | 914 American Association of State Highway and Transportation Officials For Audits of Transportation Consultants UNIFORM AUDIT ACCOUNTING GUIDE September 2005 2005 by the American Association of State Highway and Transportation Officials. All Rights Reserved. This book or parts thereof may not be reproduced in any form without written permission of the publisher. Printed in the United States of America. AASHTO Uniform Audit and Accounting Guide for Transportation Consultants September 2005 Update ii Uniform Audit and Accounting Guide For Audits of Transportation Consultants Indirect Cost Rates Prepared by the American Association of State Highway and Transportation Officials AASHTO Audit Subcommittee September 2005 Update Assistance and consultation provided by Federal Highway Administration FHWA Resource Center Atlanta Georgia and American Council of Engineering Companies ACEC Transportation Committee An electronic version of this guide can be found at the AASHTO home page http .

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