Description

Case 5-4 Audit Client Considerations

Lanny Beaudean joined the CPA firm of Cardinal & Coyote LLP in 2008 after working for two years for

the IRS in Phoenix, Arizona. The firm is a second-tier CPA firm just below the Big Four in size. Beaudean

had passed all four parts of the CPA Exam in Arizona and decided to work for a locally based CPA firm

with international clients to gain a broad base of experience that might help him become a CFO at a

public company in the future. Beaudean has been advancing rapidly and just became a senior at Cardinal

& Coyote.

Yancy Corliss is a new audit partner at Cardinal & Coyote. One day Corliss was summoned to the office

of Sharon Rules, the managing partner of the firm. Rules told Corliss that she had been approached by a

new client, Jost Furniture International. Jost is a large southwestern chain of home furniture rental

catering to young upscale individuals who might live in a city for two years or so and then move on. It

recently opened an office in Canada and plans to expand to Europe in the not-too-distant future. Top

management at Jost seemed to imply that the firm would get the audit as long as it submitted a

reasonable bid.

Rules asked Corliss to do background checks on Jost and make whatever inquiries were necessary to

assess the potential business risk of Jost as a future client. Corliss was given three days to do the work

and report back to Rules with a recommendation. If the decision is to go ahead, then Cardinal & Coyote

would submit a bid and compete with one other CPA firm for the account. The firm believes it will be a

lucrative account, especially since the company has been in an expansion mode and will require advice

on acquisitions and other advisory services in the future.

Corliss assembled his team to review the background and other information about Jost Furniture. Corliss

asked Beaudean to head up the assessment and report back to Corliss in two days. During that time,

Beaudean would have two other staff members to help with the assignment. Beaudean was excited

about his first opportunity to work on new client assessment.

Beaudean met with Vinnie Gabelli, a transplanted Brooklyn native who had graduated from Arizona

State University (ASU) at Phoenix. Gabelli was like a fish out of water in Arizona even though he had

spent 16 months in the master's of accounting program at ASU. Gabelli thought a prickly pear was

someone who could not make it in Staten Island and moved to Brooklyn for a better life.