Study the scenario and complete the question(s) that follow. Geotrack Limited You are a partner in a
Question:
Study the scenario and complete the question(s) that follow.
Geotrack Limited You are a partner in a medium-sized audit firm, KLMP Registered Auditors, and were approached by the board of directors of Geotrack Limited (Geotrack), to inform you of an audit vacancy. They requested that you accept the engagement as auditors and submit a quote. During the course of your meeting with the board, the following information was obtained. Geotrack, a company listed on the Johannesburg Stock Exchange (JSE), specialises in vehicle tracking and fleet management products. The company is regarded as one of the market leaders in South Africa in terms of product range and offers unsurpassed business solutions. An average of 1 100 tracking and monitoring systems are installed per month, through a network of 34 fitment centres throughout the country. Although Geotrack has a history of strong financial results, the COVID-19 pandemic has affected the company badly. This, together with a number of large capital-intensive projects and bad acquisitions, has resulted in the company incurring huge losses in the last two years and wiping out virtually its entire capital and reserves. Creditors have also not been paid regularly recently and the company's bankers have threatened closure on the company's overdraft facilities. The listing of Geotrack was suspended by the JSE in March 2022 following an investigation into certain breaches of listing requirements by management. Rumours also surfaced that management have manipulated the financial statements in recent years and overstated asset values. The board is working hard to resolve all of these issues and has replaced certain managers. The new managers have since made significant progress in cleaning up the business. The board has however lost confidence in the current auditors, Brits Accountants & Auditors Incorporated (Brits Inc), feels that Brits Inc should have uncovered the corrupt management practices and deceitful financial reporting practices of the previous management:
Source: Daniels, J. C, 2022. |
Explain why you might decide not to accept Geotrack Limited as an audit client. (15marks)
Core Concepts Of Accounting Information Systems
ISBN: 9780470507025
11th Edition
Authors: Nancy A. Bagranoff, Mark G. Simkin, Carolyn Strand Norman