Recent Accounting Scandals Suggest the Need for Care on the Part

question 11

Essay

Recent accounting scandals suggest the need for care on the part of an independent auditor in accepting new clients.The independent auditor needs to know both the business of and the personnel employed by a prospective client.All other control procedures are fruitless if a CPA chooses to serve an undesirable client.The damage suffered as a result of associating with an undesirable client can be irreparable.
Discuss some key issues an independent auditor should consider in the client acceptance decision.

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Definitions:

Final Processing Department

The last department in a manufacturing process where goods receive their final touches before being declared finished products.

Finished Goods Warehouse

A storage area for products that have been manufactured and are ready for sale.

Conversion Costs

Costs incurred to convert raw materials into finished products, including labor and overhead expenses related to the manufacturing process.

Process Costing System

An accounting method used to assign costs to units of production in continuous or process manufacturing environments.