Thomas Jefferson, an audit partner with your firm, has selected you

Question

Assume the following is independent of the above problems.

Thomas Jefferson, an audit partner with your firm, has selected you to prepare a memo regarding the acceptance of ABC as an audit client. The audit will, if accepted, occur during the firm’s slow season when there is excess employee capacity.

Assume the following:

The predecessor auditor explained that due to disagreements on the application of GAAP ABC, Inc. chose to engage another auditing firm. The auditor, fearing litigation, would not specify the specific areas of disagreement.

ABC regularly pays its accounts payable 30-60 days late.

Management turnover has been excessive

ABC is in a highly regulated, competitive industry

Accounts Receivable turnover is 43 days

Required:

Given the above information what procedures would you undertake to determine if ABC should be accepted (i.e. as it relates only to the scenarios above).

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