GORAB & Associates, a local auditing firm in Ghana, has just accepted a new privately held company (Adepa Ltd) as its client. The company is considered as one of the largest in the sub region. It is well known in the real estate industry and its owner, Sir One, sponsors the Ghana Premier League (GPL) with the companys logo and name on the players jerseys. Since the company is well known, the audit partners concentrated on the scope and price of the engagement. The auditors are well aware of the previous auditors, but given the reputation of the company, they did not feel a need to contact the predecessor auditors because it was a routine bid for audit and the current auditors were also bidding. The auditors, thus, did not find it necessary to write an engagement letter. After beginning the audit, the auditors find out the following: a) The audit committee was not involved in the decision to change auditors and only one of the three audit committee members are outside directors. b) The company engages in significant related-party transactions to minimize its tax liability. Although not illegal, the transactions do not meet the substance criteria required by the GRA. Company management is adamant that it will not change unless GRA requires it to change. c) There are a significant number of related-party transactions with the owner, and no valid business reason or economic benefit to the company is associated with these transactions. d) The decision to invest $15million in sponsoring the GPL was not approved by the board, but came at the dictate of the company CEO, Sir One, who has passion for soccer. e) The board consist of mostly family members with only two members who might be considered outside directors Required a) What are the important deficiencies in the auditors process of accepting the audit client and what should have been done prior to accepting the client? b) What choices does the auditor have regarding continuing the audit or resigning from the audit? c) How would an engagement letter have been useful to the audit firm in this engagement?