Charlie Corporation, CPAs, is considering whether to propose to perform the audit of Pioneer Company. The company is a large manufacturer of plumbing materials and hardware whose products are sold worldwide. Pioneer is headquartered in Europe and all of its manufacturing and warehousing properties are located in Europe; yet, it has a considerable market share in Germany, Austria, and Switzerland. Recently, the company acquired a Chinese company that provides marketing and promotion services. Management of Pioneer Company claims that the acquisition will enable the company to handle its own global marketing and promotion activities, and will also help it establish a stronger presence in China. Lee Kamba is an in-charge auditor who has been assigned to conduct additional background investigation of Charlie Corporation. As a result of a media search and analytical procedures, Lee gathered the following information: Pioneer's sales revenues for the prior year were $3.7 million, and an increase of 8% is projected for the current year. Net assets are $15 million Pioneer Company major supplier is a firm that is 40% owned by Brian Adams, founder and majority shareholder of Pioneer Company The company's profit margin exceeds the industry average despite declines in cash flows from operations and inventory turnover. Computer systems were outdated, but the company plans to implement a new, customized automated system. Management indicates that the prior auditors, Lea & Mia LLP, were dismissed because the company was disappointed with their lack of expertise related to the selection and implementation of an automated accounting information system. Lea and Mia were not yet available for consultation Management indicates that the prior auditors, Lea & Mea, LLP, were dismissed because the company was disappointed with their lack of expertise related to the selection and implementation of an automated accounting information system. Lea & Mea were not yet available for consultation Management was not willing to divulge specific details pertaining to the company's internal controls until its new auditors were named, but indicated that the systems were strong. After gathering information about Pioneer Corporation, Lee arranged a meeting with the partner in order to discuss his findings. Lee concentrates on the obsolescence of licenses and information technology in different departments which is causing most staff to redo the work manually to reconcile balances with their system. Moreover, Lee informed the partner about his meeting with the predecessor auditor that the major disagreement was because the client refused to adjust material misstatements and the auditor issued a qualified opinion that gave negative signs about the company image especially that it is planning to go public. Pioneer Company stated that Charlie Corporation was being invited to propose on the engagement because of its experience at both performing integrated audits for publicly- traded businesses and assisting companies that issued IPOs. Pioneer Company is anticipating an IPO within the coming year. The partner agreed to submit RFP and after one weak, he was informed that his company won the engagement and they will be assigned as the new auditor of pioneer Corporation. Required: Answer the following questions. 1. Based on this case scenario, list and explain the significant risk factors that will affect the decision by Charlie Corporation whether to propose on the engagement or not. 2. What do you think the reasons that motivate the partner to apply for the engagement? 3. Suppose you were the auditor of Pioneer Company, and you were approached by Pioneer Company to provide consultation services to improve the efficiency of IT systems, will you accept the engagement? Why? 4. What are the risk areas that will affect the auditor preliminary procedures if the engagement is accepted