Question

Grand slam Co. operates the largest sports and entertainment business in the United States. Grand slam recently became one of the largest U.S. nonpublic corporations, was named number two on Best Place to Work list, and was recently listed on the Most Ethical Company list. Grand slams accounting department has never had negative publicity, nor has the company ever restated financial statements for any reason. As Grand slam Co. is growing fast, it has issued an RFP because the Audit Committee feels it requires a larger audit firm to fulfill its professional services needs.
At first glance, Jim, the managing partner of a mid-size public accounting firm thinks that Grand slam would be a great opportunity to expand his firm into the sports and entertainment industry. Furthermore, its clean accounting record suggests that Grand slam would be a low-risk client for the firm. Upon putting together his firm’s proposal, Jim realizes that to fill the audit’s needs, his firm would need to fly in an array of specialists and resources from around the country. This would create a significant cost that Grand slam would likely view unfavorably. Furthermore, there have been recent rumors that Grand slam is considering an IPO.

Required:
a. Although Grand slam appears to be a great opportunity and low-risk client, what are some issues that would make the company an unfavorable potential client for Jim’s firm?
b. Why are the potential costs of staffing the audit significant? What are the business risks to Jim’s firm?
c. Why is the potential IPO significant to Jim’s decision on the proposal?



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  • CreatedJanuary 21, 2015
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