Q4 - You are a partner with a firm of Chartered Certified Accountants that has been invited, by the board of directors, to accept nomination as external auditors to BAH, a publicly owned incorporated business. BAH operates a number of car dealerships and has grown rapidly over the past two years through an aggressive take-over strategy. You are aware that the company's existing auditors, a much smaller firm, qualified their last auditor's report. Over lunch with a number of your firm's partners, the company's chief financial officer maintained that their existing auditors could not cope with the audit of a company their size and, in particular, were not equipped to audit the recently installed sophisticated computer accounting program. He also suggests that they need a firm of your reputation in order to reassure the market as they intend to seek a public listing within two years. The existing auditors, in response to your inquiry, advise against accepting the audit on the following grounds: Insufficient consideration has been devoted by management to developing the accounting system in line with the expanding business. In particular there is a lack of concern as to control. They detected a number of petty employee frauds as a result of control weaknesses. No action was taken against the employees identified as engaged in fraud. The attitude seems to be to encourage risk taking employees who, if they make money on the side whilst securing good deals for the company, that is seen as a legitimate bonus. . The newly installed computer accounting system is unreasonably complicated. BAH claims this is necessary because of the need to maintain records to justify the company's claims for volume rebates, and bonuses under the complex incentive schemes by which car manufacturers reward dealers. . They have no evidence of deliberate misrepresentation by the directors but audit staff were hindered in their audit work by a less than helpful attitude by senior management who adopted an aggressive stance whenever a query was raised. The chief financial officer was constantly on the phone to the partner claiming the audit staff were incompetent and accusing them of wasting his time asking unnecessary questions. At a partner's meeting a majority of partners accepted the story that the existing auditors were out of their depth and that their complaints were merely an attempt to cover up their own shortcomings. Your firm accepted nomination and was duly appointed as auditors. REQUIRED State factors you should consider for and against accepting nomination