Reference no: EM13336411

The purpose is to help ensure that an auditing firm does not accept a client for which they do not have the manpower (woman power) or expertise to adequately service. Also, to help ensure that an auditing firm does not find out "too late" that the industry in which the new client operates is a high-risk industry - high-risk is fine only if you are prepared for it.
There are many journal articles out there about the topic of client approval. In the textbooks, look for the chapter on The Auditing Firms Required System of Quality Control or even specifically on approval/acceptance of new or continuing audit clients.
Step
1. Intro of company--A brief description of the company, including the history of the company. The Subject Organization can be any company, public or private, including not-for-profit organizations.

2. History of develop and recent develop- If the client is a public client, the date and purpose of the latest Financial Statement 8-K filing should be given. Specify by date filed the most recent Form 8-K filled by the company. State the subject of the 8-K
Do not include the financial statements - just the ratios that you think are relevant. Include ratios of a competitor, or of the industry

3. A clear statement that the potential client should, or should not be accepted. State your conclusions in the first paragraph of the report. Say something such as: "For the reasons given below, I recommend that we accept (or do not accept) ABC Co. as an audit client."