Ocean Manufacturing, Inc.
is recommended as a prospective audit client of Barnes and Fischer, LLP. I believe that Barnes and Fischer should accept the client because of Barnes and Fisher’s opportunities in consulting and information technology (IT) development, Ocean Manufacturing, Inc. ‘s sound management/business model and past successful audits, and primarily, the growth potential of Ocean Manufacturing, Inc. following its planned IPO.
Ocean Manufacturing has a favorable market position in the Home Appliance Industry.This is a market that Barnes and Fisher has not focused on and would be an “excellent opportunity for Barnes and Fischer to enter a new market.
” In addition to entering a new market, Barnes and Fisher would have multiple opportunities for consulting regarding Internal Controls and also in IT Development. Ocean wants advice and guidance for the IPO and troubleshooting its IT system.
Barnes and Fisher’s local IT Team is “confident they will be able to diagnose Ocean’s Control Weaknesses and help Ocean overcome current difficulties.
” Currently, Ocean Manufacturing Inc. s not Publicly Traded, therefore, its Audit and Internal Controls have been more relaxed but still in accordance with PCAOB. Until the IPO occurs, Barnes and Fischer will be able to offer consulting advice, and according to the PCAOB, will be allowed to engineer the IT Control system after the IPO.
The previous auditor of Ocean Manufacturing, Inc. lacked the technical expertise to understand sophisticated controls software and was not competent in providing required consulting services to move the company towards its goal of national markets and future IPO.The President explained that the main reason for the switch is to build a relationship with a more nationally established CPA Firm because the Company plans to make an Initial Public Offering, (IPO), of it’s common stock within the next few years. ” The previous auditor was perceived to be technically lacking because they did not understand Ocean’s Business and Industry Environment.
Ocean’s Management was candid in admitting to have had some minor accounting problems and allowed those at Barnes and Fischer to contact the previous auditor in the spirit of full disclosure.Ocean Manufacturing, Inc. is planning to go public and expand nationally; therefore, the company has the potential to become an even larger, more attractive client. According to SAS 112, auditors are now required to inform clients about any “significant deficiencies” in accounting procedures or internal controls.
This is exactly what Ocean Manufacturing Inc. is asking Barnes and Fischer to do. Because they are not yet a public company, consulting services are allowed. Ocean is “concentrated on maintaining a steady growth rate by providing reliable products with a moderate to low price range.
Their current management goal is to aggressively expand from a regional to a national market, and they have been successful at this with three resent accounts with large retail chains. Out of 1200 active credit customers, the “six largest customers account for 15% of accounts receivable. ” This means they have been successful in supplying to these larger retailers and are continuing to expand. Because of this, sales and earnings are expected to grow.
Ocean has therefore expanded manufacturing. Financially, it is also important to note that Ocean’s accounts receivable turnover is high relative to the industry.This can be interpreted to conclude that the company is getting paid fast and effectively for its services to good, reliable clients. It is a strong point to suggest that no client can come without some potential questions and concerns.
Although Ocean Manufacturing, Inc. is not an absolutely perfect client, I still recommend to accept them as a the new client due the opportunities for Barnes and Fisher to enter a new market segment and increase its consulting services, plus the huge growth potential of Ocean.
Cite this Ocean Manufacturing, Inc: The New Client Acceptance Decision
Ocean Manufacturing, Inc: The New Client Acceptance Decision. (2018, Feb 24). Retrieved from https://graduateway.com/ocean-manufacturing-inc-new-client-acceptance-decision/