CASE 1.1 Ocean Manufacturing, Inc.
The New Client Acceptance Decision [2] What nonfinancial matters should be considered before accepting Ocean as a client? How important are these issues to the client acceptance decision? Why?
I believe the IT issues are important to consider but after speaking to Barnes and Fischer’s IT department they feel that diagnosing the weakness in controls that they should be able to handle the IT system being used. I also feel that the turnover is important but that this turnover was due to personal issues so this can also be disregarded. The fact that the company is considering IPO in the future would be a great investment in Barnes and Fischer to broaden the industry representation. I believe these are all very important when deciding to represent this company. [5] [a] Prepare a memo to the partner making a recommendation as to whether Barnes and Fischer should or should not accept Ocean Manufacturing, Inc. as an audit client. Carefully justify your position in light of the information in the case. Include consideration of reasons both for and against acceptance and be sure to address both financial and nonfinancial issues to justify your recommendation.
See first memo
[b] Prepare a separate memo to the partner briefly listing and discussing the five or six most important factors or risk areas that will likely affect how the audit is conducted if the Ocean engagement is accepted. Be sure to indicate specific ways in which the audit firm should tailor its approach based on the factors you identify.
See second memo [6] [a] How might the confirmation tendency affect the client acceptance decision?
Because of the information provided by the previous auditor an individual conducting an audit may try to focus their evidence on information provided and the beliefs that they all ready have about the company. Information should be