Ocean Audit Case Summary

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Pros
-Opens up to the small home appliance market for Barnes and Fischer and the company is growing.
-Ocean is financially stable and is growing at a steady pace. This is good as Ocean will be less likely to commit fraud. This would also reduce chance of law suits compared to if the company performs poorly.
Cons
-Although the company is performing well financially, with the new management turnover and accounting system change it becomes increasingly difficult to audit. With the change in controller, it appears he is frustrated with the company's new IT system which could mean an increase in control risk. -The distribution of the financial statements will eventually become public once Ocean does their IPO which will increase reputation risk. …show more content…
This can also be an increase in audit risk as with more complicated systems it would be more difficult for the auditor to catch misstatements.
-Additionally, they changed auditors three times over 12 years which instigates some doubt of the managements integrity or auditors not having the necessary skills and knowledge. Even though the predecessor auditor explained that they were not technically competent to perform the audit it seems as if he was coerced to making auditing decisions to receive a clean opinion. This reduces the auditee's trustworthiness and increases audit risk.Also, Ocean's vice president's involvement with illegal gambling decreases their management's overall integrity.
-With the new accounting system, Ocean needed to retrain the accounting staff meaning an increase in potential errors and less conventional audit trails, increasing the audit risk.
-A specialized IT system for Ocean that is difficult to diagnose but the IT team seems confident they can identify the control weaknesses. This requires a higher level of competence compared to conventional IT systems and the lack of experience with it may lead to

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