Question -
You an auditor in an accounting firm. The audit partner in your firm has been approached (on 5 November 2016) by the managing director of Clarkson Limited, a manufacturer of shoes, to perform its audit for the financial year ended 30 June 2017. The partner asks you to do some research about Clarkson Limited. In your review of the financial press you find some articles including:
An article on 5 August 2015 questioning Clarkson's policy on capitalizing research an development for the first time in 2015.
An article on 27 September 2015 announcing that two of the five directors were resigning.
Required -
(a) How would the above two issues affect the audit partner's decision on whether to accept the engagement?
(b) What other information sources should you review to help the partner evaluate the client?