Issues Involved in Client Acceptance and Renewal - Assignment Example

The procedures involved in the investigation include going through the reports by preceding editors, and obtaining information from the management whether any of the officers have been convicted of a crime. Carrying out the fact-finding mission of the preceding auditors on management’s integrity, disagreements, or any other additional information on why the firm should decline the audit. Finally, there is a discussion of the potential client with the attorneys and bankers of the entity.

The client continuance and acceptance forms facilitate the continuing and prospective client investigations. The forms undergo updating and renewal yearly to keep evaluating engagement and association with the client. The investigation of both the new and renewal clients is important for it enables the firm to establish the quality of the client they serve as well as if they meet the standards. At the same time, the forms are essential in the bid to avoid omissions in the whole process of investigation. On accepting the client or renewing the engagement, the client personnel’s quality should be estimated as high incompetence and integrity. The attributes shape the foundation for evaluating risks at the level of financial statements and gathering facts on audit engagements.


Risk factors present in the company on the audit standards

            Jos A. Bank is a cloth line company, and there are various risks of the development of scandals in the business. These are aggravated by the nature of the business. The major factors are those that can lead to fraud and they include the nature of the items in the company, and the ease with which one can resale the products of the company outside is a major risk factor for fraud. The value of the clothes is not so high per piece which makes it easier for the incident of fraud because of the ease with which the products can be gotten out of the premise due to their size.

The nature of the environment in the business also is among the risk factors of fraud. 

There are a number of individual factors that can lead to fraud (Green & Lide, 2009). The complexity of the business gives leeway for the employees to manipulate the results of these transactions. The Jos A Bank is a large company with several stores and chains around. Therefore, the level of complexity is high in the company allowing the ease of manipulating the results. There is no tight safeguard to the equipment and the products, and, therefore, general security and safeguard may miss out.

Justification of a client's acceptance

            The client is accepted in the organization after meeting the standards set. First, there is a criterion laid down criteria to determine the integrity of the client. The integrity of the client is crucial for the client may ruin the perception of an organization by the public. Secondly, the client has the qualities needed to carry out the engagement. The client must be having the resources and the capabilities of carrying on the engagement (Green & Lide, 2009). Therefore, the client who has met this stands a chance of acceptance or renewal, without the minimum requirements, the client does not stand a chance of getting in.

Adequate information is sought before a new engagement is accepted or when deciding to continue with the existing engagement. The fact that the necessary information is sought, therefore, the client to be renewed must have met the minimum requirements to be taken. An evaluation form that leaves no omission in determining the reliability of the client guides the investigation.

Standards for a new client and their application

            For a client to be accepted, the firm should be able to do the work in the engagement. The firm should formulate a formal statement of its areas of performance. At the same time, the firm should comprehend the business and the industry (Feng & Pevzner, 2013).

. The incompetency increases the risk of disappointing even third parties.

            There should be an evolution of financial literacy, sophistication, integrity, reputation, and dedication to correct controls of the potential client. There should be an interview conducted by the firm on third parties and preceding accounting firms for the mentioned purpose. The firm should establish the logic behind the expectations of the potential client. Assess the work's complexity; this is in a bid to mitigate the risks. When complex engagement is pooled together with a number of other risk factors, it will be the greatest risk (Carcello, Hermanson, & Raghunandan, 2005).

Enquire about the reason for leaving the preceding auditors, the turnover of its staff, its history of paying bills, and the financial status and history of the client. The CPAs are there to notice fraud and even review their engagements. The right to disengagement on the failure to meet the responsibilities of the client should be a part of the engagement letter (Feng & Pevzner, 2013).

The inclusion is meant to avoid disengagement at the last minute which will turn costly for the client in getting another firm to do the work.

Once the client has been accepted into the company for the first time, the acceptance and renewal form that facilitates the process guides the next process of engagement. Therefore, the standards when well-stipulated from the e time of acceptance, the client is likely to adhere to them, therefore, securing a chance for renewal.