CPA firms and auditors should be very selective in accepting engagement with new clients. They have to think of potential problems they could run into that could permanently affect their reputation. Before accepting a new client, the auditor should investigate the history of the client by obtaining information about the company and the management. If this information presents a level of engagement risk that the CPA firm is comfortable with, then they can move forward with acceptance. The procedures that auditors perform to determine whether or not they are going to accept a new client or continue working with an old one are the “foundation of the risk assessment process, primarily at the financial statement level” (2).

a. Present arguments supporting a decision to accept Tierra Corporation as an audit client.
Considering the different areas of risk that Tower & Tower would be undertaking, there are some arguments to support their decision to take Tierra Corporation on as a new client. First, Tierra Corporation’s banker and attorney had great things to say about the company. Nothing that was mentioned was a concern for either of those outside parties. Next, the company is successful and profitable. The profitability of the potential client would actually reduce the amount of engagement risk (3).

Another argument for the acceptance of the new client is that Tower & Tower seems to be in a position to take on the engagement. Next, this company would result in a profitable engagement for Tower & Tower, as the audit fee would be substantial. They would gain Tierra Corporation as a client and potentially other companies through which they are associated.

In talking with various parties, Tammy found that Lewis Edmund, the owner of Tierra Corporation, is in good standing with the community. This could go to show that he has a certain level of