Given the attached case study and data, please answer the below questions:
1. The client acceptance process can be quite complex. Discuss five procedures an auditor should perform in determining whether to accept a client. Which of these five are required by auditing standards and identify the applicable standards?
2. Using Ocean’s financial information, calculate relevant preliminary analytical ratios to obtain a better understanding of the prospective client and to determine how Ocean is doing financially. Compare Ocean’s ratios to the industry ratios provided. Identify any major differences.
3. What non-financial matters should be considered before accepting Ocean as a client? How important are these issues to the client acceptance decision? Why?
4 a. Ocean wants Barnes and Fischer to aid in developing and improving their IT system. What are the advantages and disadvantages of having the same audit firm provide both auditing and consulting services? Given current rules on professional independence in the Joint Code of Professional Conduct, will Barnes and Fischer be able to help Ocean with their IT system and still provide a financial statement audit?
4 b. As indicated in the case, one of the partners in another office has invested in a venture capital fund that owns shares of Ocean common stock. Would this situation constitute a violation of independence according to the Joint Code of Professional Conduct? Why or why not?
5 a. Prepare a memo to the partner making a recommendation as to whether Barnes and Fischer should or should not accept Ocean Manufacturing, Inc as an audit client. Carefully justify your position in light of the information in the case. Include consideration of reasons both for and against acceptance and be sure to address both financial and non-financial issues to justify your recommendation. (
5 b. Prepare a separate memo to the partner briefly listing and discussing the five or six most important factors or risk areas that will likely affect how the audit is conducted if the Ocean engagement is accepted. Be sure to indicate specific ways in which the audit firm should tailor its approach based on the factors you identify.