Question

You are invited by John Bray, the president of Cheviot Corporation, to discuss with him the possibility of your conducting an audit of the company. The corporation is a small, closely held manufacturing organization that appears to be expanding. No previous audit has been performed by independent certified public accountants. Your discussions with Bray include an analysis of the recent monthly financial statements, inspection of the accounting records, and discussion of policies with the chief accountant. You also are taken on a guided tour of the plant by the president. He then makes the following statement:
Before making definite arrangements for an audit, I would like to know about how long it will take and about how much it will cost. I want quality work and expect to pay a fair price, but since this is our first experience with independent auditors, I would like a full explanation as to how the cost of the audit is determined. Will you please send me a memorandum covering these points?
Write the memorandum requested by John Bray.



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  • CreatedOctober 25, 2014
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