Oceanview Assignment 1 - Discussion Questions
Assignment 1 – Discussion Questions
Factors Favoring Acceptance
1. The location being in Ocean City will be favorable for all auditors conducting the audit. This will allow for ease of travel for all auditors involved. This will also lend to the knowledge the firm has of the business and all relevant operations pertaining to Oceanview Marine Company.
2. The financial statements are organized in an easy-to-read fashion. They support that Oceanview is a healthy company and has been for the past three years. The past three years have been audited annually in accordance with their bank and management decisions.
Concerns about Acceptance
1. The location of the firm and client could lend to more knowledge but the client preferring this firm might also mean they have close ties to them. I did not see that any upper management had any connections to the firm but the close proximity may lead to a friendship that could potentially negatively affect the audit.
2. There is a contingent liability that has not been included in the financial statements. It was noted but if they are liable for their boat sinking this could lead to unidentified problems that they may be hiding.
3. Oceanview has a current outstanding balance of $5,100,000 with First National Bank when their line of credit is for up to $6,500,000. It also mentions that Oceanview is growing and looking to expand but the outstanding balance seems high when their line stops at $6,500,000.
2. Agree to accept client.
- It appears that a healthy transition from predecessor auditor to successor auditor will occur. This will allow for ease of access to any documents necessary in a successful audit. It also mentions that any management that the firm might need information from is willing and able to give it. This is also a good sign as to why our firm is accepting this audit. The other reason for agreeance to perform this audit is taken directly from Oceanview’s financial statements. Their financial
Factors Favoring Acceptance
1. The location being in Ocean City will be favorable for all auditors conducting the audit. This will allow for ease of travel for all auditors involved. This will also lend to the knowledge the firm has of the business and all relevant operations pertaining to Oceanview Marine Company.
2. The financial statements are organized in an easy-to-read fashion. They support that Oceanview is a healthy company and has been for the past three years. The past three years have been audited annually in accordance with their bank and management decisions.
Concerns about Acceptance
1. The location of the firm and client could lend to more knowledge but the client preferring this firm might also mean they have close ties to them. I did not see that any upper management had any connections to the firm but the close proximity may lead to a friendship that could potentially negatively affect the audit.
2. There is a contingent liability that has not been included in the financial statements. It was noted but if they are liable for their boat sinking this could lead to unidentified problems that they may be hiding.
3. Oceanview has a current outstanding balance of $5,100,000 with First National Bank when their line of credit is for up to $6,500,000. It also mentions that Oceanview is growing and looking to expand but the outstanding balance seems high when their line stops at $6,500,000.
2. Agree to accept client.
- It appears that a healthy transition from predecessor auditor to successor auditor will occur. This will allow for ease of access to any documents necessary in a successful audit. It also mentions that any management that the firm might need information from is willing and able to give it. This is also a good sign as to why our firm is accepting this audit. The other reason for agreeance to perform this audit is taken directly from Oceanview’s financial statements. Their financial