Interactive Learning Approach Essay

Complicated modern computer system. The complicated system poses a couple of problems for the auditors. First, the auditors whitethorn have difficulty getting the information they need from the system, and a question arises regarding auditability. Second, inadequate controls over the sweet system may summation the amount of substantive testing required. Client hesitant to allow stark naked auditor to speak with previous auditor. Anytime a guest is hesitant or un bequeathing to allow spick-and-span auditors to communicate with the previous auditor, a red flag should be raised in the mind of the substitution auditor, and a careful examination of the issue, including consideration of solicitude integrity, should ensue. Illegal gambling incident. This is a matter of partake because it raises the management integrity issue.What the V.P. of finance did was definitely wrong, but the impact on the overall integrity of management is a matter of judgment. This issue can be debated amon g the students. Some endure come down on iodin side saying that if a key member of management is dishonest in one thing, he is likely to be dishonest in others. Other students will argue that the incident has weensy to do with the bloodline and its management, especially since there are no other known incidents. At a minimum, this incident creates an opportunity to raise and discuss the central role of management integrity in the client acceptance decision.Initial public offering. Ocean has plans to go public and aggressively rarify into the national market. If successful, these plans will make Ocean a more attractive client for Barnes and Fischer, but they also serve to increase the auditors business risk (increased reliance on the statements, increased litigation risk, etc.) and should be considered. guidances aggressiveness. There are some indications in the font that management is willing to manipulate the fiscal statements via year-end accruals and revenue recognition t o achieve relatively low interest rates from creditors. This raises a potency management integrity issue, and should be heavily weighted in view of the fact that the upcoming initial public offering may give management even greater incentive to manipulate the financial statements.Relationship with harbinger auditor. This issue is left intentionally debatable in the case, but is sure as shooting a concern that should be raised. Therelationship with the predecessor auditor has been negative, and this is cause for concern. On the other hand, the poor relations may be present because the auditor did not have a sound understanding of Oceans business and was not competent in helping Ocean with its new IT system. Personality issues can also play a role. Further, the apparent differences over the current years audit fee should be a concern to Barnes and Fischer from a business perspective. Students should also raise positive non-financial issues, such as the opportunity to expand into a new industry and the opportunity to provide significant consulting services relating to Oceans new IT system as well as to Oceans internal controls. The company has a relatively long and stable history in the small appliances industry.Further, Ocean is well positioned in the small appliances market. With its plans for loss public and expanding nationally, the company may become an even larger and more attractive client. Some students will think the case represents a clear non-acceptance situation due to the negative factors listed above. The instructor can provide some perspective by pointing out that no prospective client comes without some concerns and problems. Ocean certainly presents some issues and concerns, but would likely be accepted by most auditing crockeds. (Two different partners from major firms commented in presenting this case to graduate auditing courses that the level of risk presented by Ocean Mfg. was fairly typical of many of the firms clients. In our experi ence, most students indicate that they would not accept Ocean Mfg. as a client. This case provides an opportunity for students to better understand the subjective issues and risks that auditors face in practice.).