The Lakeside Company: Auditing Cases
Analysis of a Potential Audit Client
· Benjamin Rogers is president of the Lakeside Company, a retailer/ distributer of consumer electronics. · Rogers is unsatisfied with King and Company's CPAs, and has been in contact with Abernethy and Chapman. · Abernethy and Chapman has never had a client in this field and they look forward to breaking into a new market. · Lakeside has grown at a steady rate in the last decade. · They moved from a bargain-priced electronic market towards a higher end product as the sole distributer of Cypress equipment. · Lakeside began marketing Cypress equipment by selling to other retailers. Sales were slow at first until the Cypress reputation began to spread. · Lakeside takes advantage of all discounts available, and as such, they need to hold credit lines with 2 banks in Richmond, Virginia. · Rogers would like Abernethy and Chapman to take over their account, as well as help develop new accounting systems. · King and Company issued a qualified opinion audit for 2005 that Rogers did not agree with. This was based on their sixth store that was built in a location where they have not been able to break-even. · Lakeside Company is owned by 8 investors. They require, along with the banks that an audit be done annually by an independent CPA firm. · Employees are being motivated by bonus incentives for an increase in sales. · Growth is Roger's main business objective.
1. It is a good idea for the owners of Lakeside, as well as the Bank, to request an annual audit be performed by an independent CPA firm. Audits are performed in test the reliability and accuracy of information being received, as well as to give an assessment of a company’s internal controls. An audit enhances the credibility of the financial statements being received. Both the owners and the banks have a vested...