Acceptance Or Rejection Of An Audit Client: Understanding Risk In The Auditing Environment

Abstract

In this case, students are required to conduct an initial assessment of a potential audit client and provide a well-supported recommendation to the audit partner. Specifically, students are assigned a company and asked to gather and evaluate data on it and its upper management. Based on that information, students are to make an objective recommendation to the firm on whether to accept, accept and consider a risk-adjusted audit fee, or reject the client; they are also required to provide the reasoning or argument for the decision. This case has many learning objectives. First, students will demonstrate their research and critical thinking skills and apply those skills by evaluating the information to make a judgment similar to that required of audit professionals. Second, students will create a memorandum that concisely summarizes the obtained information and provide a well-supported recommendation. Third, students will understand and be able to communicate the various types of risk in the business environment. Finally, the case assists students in converting their perspective from that of an accountant to that of an evaluator or auditor. Moreover, the case can be used to introduce professional skepticism and the importance of maintaining objectivity when making a judgment.