Chapter 7: Case 7-25 – New Client Acceptance Essay

3278 Words Dec 31st, 2010 14 Pages
Chapter 7: Case 7-25 – New Client Acceptance,
Comprehensive Case: Mt. Hood Furniture, Inc.
Company Background Information: Your employer, Reddy & Abel, LLP, Certified Public Accountants (who is registered with the PCAOB and audits public companies), has been approached by a prospective client, Mt. Hood Furniture, Inc., about your firm taking on their account. The firm has adopted procedures for the acceptance and retention of clients following the AICPA guidelines for quality control in an accounting practice. The firm requires that a partner interview all prospective clients to determine what services the client needs and the ability of the firm to provide those services. As the prospective senior on the engagement, you accompanied the
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Hood offers both pension and profit-sharing plans; the plans have been in place for over 25 years. The company distributes its products through a small network of approximately 150 office furniture dealers in major U.S. cities. Recently, the company placed its product with several national chains and warehouse-club chains. Most of the sales growth over the last two years is attributed to this new distribution channel; it represented 35 percent of year- 20X3 sales. Their largest single customer accounts for 8 percent of sales. The company also produces a catalogue and has an information web site with an order link. The office cabinetry line offers custom orders for on-site installation. Customers include major hotels and professional and corporate offices. Today 20 percent of sales come from this line, and the chief operating officer would like to see this line grow to a total of $25 million in sales in the next three to five years. Individuals, which comprise about 5 percent of total sales, can order directly from Mt. Hood Furniture using the company’s web site. A large showroom is maintained at the corporate offices; customers may also place orders at the showroom. Mt. Hood Furniture is subject to a variety of federal, state, and local laws and regulations relating to the use, storage, handling, generation, transportation, treatment, emission, discharge, disposal and remediation of, and exposure to, hazardous and nonhazardous substances, materials, and wastes. In

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