Audit & Assurance Assignment

Topic: Acceptance/Rejection of Audit Client

Scenario 1

A software company is looking for a new auditor. The company has grown through an acquisition and needs an auditor that can handle its additional requirements. The new auditor sees no independence issues. Discussions with the predecessor auditor, the audit committee, and management indicate a good tone at the top and provide a consistent story about the company and its reasons for changing auditors.

Scenario 2

A firm has been asked to submit a bid on a new engagement. An individual with experience in the investment industry is starting a new hedge-fund company. The company is looking for an auditor so that audited financial statements can be provided to potential investors. While the firm has 15 offices in the United States, the firm has very limited experience auditing investment companies or hedge funds. A background check on the CEO indicates he had allegations of improper business dealings and possible fraud with a company he ran five years before.

Requirement:

Assume that you are Partner/Audit Manager of said Audit Firm. Suggest the action along with rationalization that should be considered for accepting or rejecting the new Audit Assignments.