A5.2 Twatt - integrity should also be considered. 5-37....

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Chapter 5 Tiffany Watt Assignment: A5.2 Oct. 14, 2011 AC 405 – E01 5-34. (a) Set up a table with side-by-side columns listing the positives and negatives of each client. Positives Negatives Company 1 - Low risk to firm Profit is lowest Privately owned Company 2 - Small Medium risk Publicly traded More Profit Company 3 - Highest profit High risk to the firm (b) Is there any additional information you would like to have in selecting the company that Sterling Cooper should choose as a new client? If so, list it. Before taking on a new client, additional information that should be considered is the potential client’s published financial information, performance information, and the company’s accounting practices and disclosures. In addition, the company’s reputation, ability to pay for services rendered, and management
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Unformatted text preview: integrity should also be considered. 5-37. Based on this case scenario, list and explain significant risk factors that will affect Custiss & Branchs decision regarding whether to propose on the engagement. A list of significant risk factors that may affect Custiss & Branchs decision are: 1. The related party transactions. 2. Declining cash flows from operations. 3. The IPO would require a greater amount of experience. 4. The complexity of Hemings business operations. 5. The companys financial statement may be misstated because the profit margin exceeds the industry average despite declines in cash flows from operations and inventory turnover....
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