Memorandum

Nameof author

To:Partner of Barnes and Fischer

Cc

From:Audit Manager

Accepting Ocean Manufacturing, Inc. as an audit client

Ina few years’ time, Barnes and Fischer Company intend to conduct anInitial Public Offering (IPO) of its public stocks (Beasley,Buckless, Glover &amp Prawitt, 2012).The company’s primary activities are the preparation of auditingand tax services, but they recently diversified to be consultants oninformation systems. To adequately complete this task, theinstitution needs to establish a relationship with a national CPAfirm. However, according to the partner’s explanation, theprospective client is a medium producer of small home appliances,named Ocean Manufacturing Company. Ocean seeks assistance on thefinancial statements dated back to December 31st, 2011. They madesuggestions for help in establishing their IT system so that allaspects of the firm can be in check for the upcoming IPO (Beasley,Buckless, Glover &amp Prawitt, 2012).

Itis advantageous to work with such a company as it has the promise ofconsiderable growth (Hobson,Mayew, Peecher &amp Venkatachalam, 2016).Oceans began supplying high amounts of its products over the pastyears to three national retail chains. Working with such a firm wouldincrease the opportunities for linking with the larger nationalbusinesses and lines which are crucial for Barnes and Fischer’s IPOinitiative. The company’s revenue has been on the increase over thepast three years while its products have gained popularity in theproduct market.

However,it is worth noting that Oceans has been shifting its auditors overthe past dozen years, about three times. Also, significant managementchanges occurred such as in October of 2011 when the vice-presidentof operations together with the controller resigned and soughtemployment in other cities presumably because of personal reasons.The company seems to observe a lot of privacy in employee’s matterswhich can limit the analysis of some records that could be based onthe employee data such as their perceptions and attitudes (Smith,Tayler &amp Prawitt, 2015).It implies that the Barnes and Fischer Company may face a lot ofproblems while trying to analyze the Oceans company information.

OceansCompany has a new accounting system that observes a general payroll,creditors’ and debtors’ accounts, the inventory and the overallledger software modules. The switch to this new scheme was poorlyfacilitated as there are many challenges in inventory tracking andcost accumulation, payrolls and tax charges and problems in computingthe balance sheet (Beasley,Buckless, Glover &amp Prawitt, 2012).This situation frustrates the accountants and the managers at theOceans Company as many documents are presented when it is late, andseveral transaction deadlines have been missed (Smith,Tayler &amp Prawitt, 2015).The company has a high number of trade transactions which range from3,900-3,400 activities monthly.

Oceans’management is hesitant in disclosing information such as the issueswith the previous editors. They readily dismiss the case stating thatthose firms never understood the business environment of the company.After pressing on and acquiring the permission to talk to the formereditors, they reported that some of the problems which they facedworking with oceans were complications of the new IT system and theinsistence of the management to make drastic projections about theend-year profits to satisfy the creditor’s worries. After furtherinvestigations, it was unveiled that Oceans Company faced a lot ofethical issues such as the count of the finance vice presidentparticipation in illegal gambling on a local college.

Itis hard to work with such a company as Barnes and Fischer Companyobserves a complete disclosure of information about the employees’personal financial status after every three months (Beasley,Buckless, Glover &amp Prawitt, 2012).However, no significant relationship exists between the Barnes andFischer’ employees with oceans company. The institution`s financialstatements portray n increasing trend in the total sales though thereis a drop in the profit margin.

References

Beasley,M., Buckless, F., Glover, S., &amp Prawitt, D. (2012).&nbspOceanManufacturing Inc. &quotThe New Client Acceptance Decision.&quot.

Hobson,J. L., Mayew, W. J., Peecher, M., &amp Venkatachalam, M. (2016).Improving Experienced Auditors’ Detection of Deception in CEONarratives.

Smith,S. D., Tayler, W. B., &amp Prawitt, D. F. (2015). The Effect ofInformation Choice on Auditors` Judgments and Confidence.&nbspAccountingHorizons.