Case Study $2$

Juliet B a partner in Stamp & Hoppit, Registered Auditors,

receives a telephone call from the Managing Director of

Chateaubriand Ltd which runs a chain of restaurants and

bars. They wish to appoint Stamp & Hoppit as auditors as

they have a disagreement with the existing auditors. The

audit would be due to commence in about two months'

time.

The Managing Director tells her that Chateaubriand runs a

chain of $12$ restaurants and $10$ bars situated in the Northern

region. It also sells ready meals under the "Chateaubriand"

name which are manufactured by another independent

company; Chateaubriand buys them in$,$ adds a margin and

sells them on through supermarkets and smaller food

retailers. This is becoming an increasingly significant part of

the business.

Juliet B carries out some further research and discovers that

Chateaubriand is a private company wholly owned by the

Staples family. The managing director is R$.$ A$.$ Staples, his

son is the sales director and his wife is responsible for

"Product Design". The finance director has been with the

company for eighteen months and there have been other

finance directors appointments in the last five years. The

company turns over $15m$ and made a profit of some

$800,000$ before tax in the last financial year.

Discussion

$-$What should Juliet B consider before accepting the

appointment?

$-$What matters should be discussed at the meeting?

$-$In the light of the first question, draft and Engagement

Letter.

$-$What might be the consequences of omissions from the

letter?