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Ocean Manufacturing, Inc Case

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Memorandum To: Jane Hunter, Audit Partner From: Date: July 2, 2015 Subject: Audit Engagement Acceptance of Ocean Manufacturing, Inc.

I am writing this you this memorandum to inform you of my recommendation as to whether to accept the audit engagement of Ocean Manufacturing, Inc. or decline. The discussion below talks about the use of client acceptance factors significant in arriving at my conclusion. It is my recommendation to not accept Ocean Manufacturing, Inc. (Ocean) as an audit client based on the significant client acceptance factors in conjunction with the analysis of both financial information and nonfinancial matters.

Relevant Facts * Ocean Manufacturing, Inc. will be Barnes and Fisher’s first home appliance industry client. * Ocean asked Barnes and Fisher to assist in continuing the development of Ocean’s IT system. * Ocean is having issues maintaining a proper inventory and cost tracking system, receivables billing and aging, payroll tax deduction, payables, and balance sheet account classifications. * Barnes and Fisher is unfamiliar with Ocean’s IT system. * Ocean is requesting the firm’s services after its December 31 fiscal year –end. * Ocean has had some management turn over by both the vice president of operations and controller due to “personal issues.” * Ocean has changed auditing firms three times over the past 12 years. * Ocean audit trails during 2014 were not kept intact due to system failures and errors made by untrained personnel. * The new vice president of finance, Frank Stevens was charged with a misdemeanor involving illegal gambling on local college football games. * Frank Stevens, Ocean’s vice president of finance, was hesitant to allow us to speak to the previous auditor. * The previous auditor and Ocean’s management had disagreements on minor accounting issues in the previous

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