You are an audit senior at Morton and Lowe Chartered Accountants LLP. The firm has recently begun to perform audits and has two partners, managers, senior and junior staff accountants respectively. Your firm has recently been approached by Don Cherry, the owner of Maple Leaf Construction, to be engaged in their upcoming audit. The company's bank requires them to submit annual audited financial statements 60 days after year end. In addition to submitting the statements to the bank, the company is bound by specific covenants. If in violation of these covenants the bank will require full payment of the outstanding loan.

The owner tells you that he had never liked his previous auditor Dafnas and Arthurs LLP. Don tells you "they would ignore my instructions on how to complete the audit and would threaten to qualify my report if I did not make adjustments to my year end work in process." He advises you not to contact them due to this poor relationship.

Maple Leaf Construction has projects all over the country and has recently been in the news for building new developments in marshy areas, and not building their homes up to code.

The company's controller Phil Kessel is a recent graduate fromNipissingUniversityand has no previous accounting experience. He was hired four months ago after the old controller Dion Phaneuf was caught for defrauding the company for over $80,000 of cash and assets.

Excerpts from financial statements are as follows:

J You are an audit senior at Morton and Lowe Chartered Accountants LLP. The rm has recently begun to perform audits and has two partners, managers, senior and junior staff accogntants respectively. Your rm has recently been approached by Don Cherry, the owner of Maple Leaf Consthction, to be engaged in their upcoming audit. The company's bank requires them to submit annual audited nancial statements 60 days after year end. In addition to submitting the statements to the bank, the company is bound by specic covenants. If in violation of these covenants the bank will require full payment of the outstanding loan. The owner tells you that he had never liked his previous auditor mg, and Arthurs LLP. Don tells you "they would ignore my instructions on how to complete the audit and would threaten to qualify my report if I did not make adjustments to my year end work in process." He advises you not to contact them due to this poor relationship. Maple Leaf Construction has projects all over the country and has recently been in the news for building new developments in marshy areas, and not building their homes up to code. The company's controller Phil Kesse! is a recent graduate from Nipissing University and has no previous accounting experience. He was hired four months ago after the old controller Dion Phaneuf was caught for defrauding the company for over $80,000 of cash and assets. Excerpts from nancial statements are as follows: 201 2 201 1 Cash (106,584) 76,854 Accounts receivable 1,025,896 658,000 Work in process - 1,056,000 Capital assets 750,000 750,000 Accounts payable 987,000 648,000 Bank loan 950,000 1,000,000 Billings inexpessg! work completed - 650,000 Sales 3,000,000 2,000,000 Cost of Sales 720,000 1,300,000 You have been asked by the engagement partner to analyse whether__gr__r_1_c_r_t to accept the client. What are three things to consider (not including engagement risks or preliminary analytical review) when accepting Maple Leaf Construction as a new client (6 marks)