Auditors don't particularly favor to turn down current or prospective clients, especially when they own stock % in the company or if it is well-known company like Shell however being worried about their reputation and future works, they try not to audit dishonest clients, because it can have dire consequences for the auditor. In the case if auditor becomes involved with bad clients, it is necessary to weigh revenues earned from desirable clients against potential problems. The most important aspect in client acceptance is client's integrity. Before getting involved with the client, an auditor needs to learn about the business, environment of the business, management of the company, and any other things related to an acceptance of a client.
Murphy Tymshare Inc is building and selling resort time-share condominiums in South Florida, it has been in business for five years. It recently bought out competing and floundering time-share development. The company stock is mainly owned by Jake (51%), the other 49 % is owned by friends and family members. Identified factors that indicate potential problems with the audit of Murphy Tymshare Inc will be discussed below.
1Q. Knechel in his book describes two types of factors, factors within the control of the auditor and those which must be evaluated by the auditor. Factors that are controlled by the auditor are expertise and staffing, and independence. Factors that should be evaluated by the auditor are integrity, reputation and image, accounting practices, financial status, profitability. These factors are crucial and they all may create potential problems with the audit of MTS in order to provide correct and reliable conclusions. They are evidently linked to MTS and to be clear how they are interrelated I will explain it more profoundly.
Expertise and staffing
"Does the firm have the requisite staff available that possesses or can obtain the needed expertise for completing the engagement on a...
Please join StudyMode to read the full document