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2. Predecessor auditor
mentioned Oceanview was easy
to deal with. The company is
locally based and received
honest communication and
experiences with clients and
third parties. Indication that
Oceanview has little previous
conflict and in these terms likely
to be a fairly simple audit.
2.
Indicate whether you agree with the decision to accept the client.
Justify your decision, indicating the one or two factors from your
response to the first question that had the greatest influence on
your decision.
We do not agree with the decision to accept the client due to several
factors. Firstly we are concerned about the threat of familiarity, as
Oceanview is local to the auditing company which may led to the
the possibility that some of our staff may have a close relationship
with Oceanview making it difficult to ensure that we are completely
independent. Secondly, from the facts we assume that the auditing
company may have insufficient resources such as staff and specified
knowledge in the industry to complete the audit.
3.
The client and our firm have agreed on an initial estimated audit fee
of $29,000. However, the estimated total cost of performing this
years audit is $37,590. Discuss possible reasons why a CPA firm
might charge a new client an audit fee that is lower than the
estimated first-year costs of performing the audit.