QUESTION ONE [20]

You are a member of the Quality Control Committee of a large audit firm; Art Andersunn and Co.

Part of the committee's responsibility is to determine whether prospective clients are acceptable

and whether existing clients should be retained. Being a large practice, numerous potential

clients are brought to the committee for consideration and the following list includes a number of

recent such cases where the audit appointment is available.

1. Nicotar (Pty) Ltd, a company which manufactures cigarettes.

2. Bluevex Ltd, a public company which owes its current auditors R75 000 in audit fees.

The company's audit committee claims that the current auditors have overcharged.

3. King Couriers Ltd, a company which has on two previous occasions sued its auditors and

on both occasions the auditors (different firms) have admitted negligence and settled out

of court.

4. Skweeze (Pty) Ltd, a chain of retail shops which sells pornographic materials and runs

escort agencies. The company is a subsidiary of a listed company in the entertainment

sector. The holding company auditors have declined the audit.

5. Interworld (Ltd), prestigious, International Corporation with operations worldwide and its

head office in Johannesburg.

Required:

Discuss the matters to which the committee should give consideration, when deciding on

whether to accept the above prospective clients. (5 x 4marks)