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Date Submitted: 10/11/2012 06:25 AM
CASE 2 Ocean Manufacturing, Inc. The New Client Acceptance Decision
By MARK S. BEASLEY · FRANK
GLOVER · DOUGLAS F. PRAWITT
A.
BUCKLESS
·
STEVEN
M.
LEARNING OBJECTIVES
After completing and discussing this case you should be able to
[1] Understand the types of information relevant to evaluating a prospective audit
client
[2] List some of the steps an auditor should take in deciding whether to accept a
prospective client
[3] Identify and evaluate factors important to the client acceptance decision
[4]Understand the process of making and justifying a recommendation regarding
client acceptance
INTRODUCTION
The accounting firm of Barnes and Fischer, LLP, is a medium-sized, national CPA
firm. The partnership, formed in 1954, now has over 6,000 professionals on the
payroll. The firm mainly provides auditing and tax services, but it has recently had
success building the information systems consulting side of the business for non-audit
clients and for audit clients that are not publicly traded.
It is mid-January 2012, and you are a newly promoted audit manager in an office of
Barnes and Fischer, located in the Pacific Northwest. You have been a senior auditor
for the past three of your five years with Barnes and Fischer. Your first assignment as
audit manager is to assist an audit partner on a client acceptance decision. The partner
explains to you that the prospective client, Ocean Manufacturing, is a medium-sized
manufacturer of small home appliances. The partner recently met the company’s
president at a local chamber of commerce meeting. The president indicated that, after
some difficult negotiations, the company has decided to terminate its relationship with
its current auditor. The president explained that the main reason for the switch is to
build a relationship with a more nationally established CPA firm because the company
plans to make an initial public offering (IPO) of its common stock within the next few
years....