Question

. Obtaining Clients - Proposal For Performing a Company's Annual Audit Case Study Facts: The Audit Firm you work for has the opportunity to submit a proposal for an annual audit of a bank. Your firm has no experience in the banking industry. The bank is a privately held family owned business. Public information shows that one family member active in management at the bank has been convicted of theft while he was working as an employee for another bank. The bank has a history of making bad loans to customers and then writing off the uncollectible loans. Your Audit Firm has experienced a lot of growth and is short of staff. Issue: Should your Audit Firm pursue getting this client? Why or why not?

Answer 1

Following are the points to be observed in making the decision

1. We have no prior experience in the audit of banking industry

2. An active management personeel has past history of mis doings which reflects on the managment of the bank

3. We are facing shortage of staff. This kind of audit requires detailed examination as there is a question on the managements integrity. Moreover, detailed analysis needs to done on the loan which have turned bad.

We should not pursue such audit assignment, as we have shortage of staff strenght, no prior experience in banking industry, integrity of the management.

History of bad loans should not be a preliminary reason for not accepting the assignment. There might be a case of irregularity or might not be. This will be ensured once the books are examined.