Client acceptance report. Prepare a client acceptance report to the partner in charge of your engagement. Use your own words to prepare a report to the partner. There is no standard way to write a report and there is no template for a client acceptance report. Internal reports such as a client acceptance report are proprietary and confidential – information and data that would be included in a client acceptance report will vary depending on the audit firm and the client involved. Your report will need to contain lists of additional information the audit firm would need to gather before the client acceptance decision is finalized. You need to make up a name for the firm that you work for. Have fun making up a name – you can choose any name that you like that would be a good name for a firm that will be auditing your client. The firm name should be in a letter head at the top of your client acceptance report. Address the report to the partner in charge of the audit, which you can assume is your instructor. This isn't a standard audit report and you can format it as a memo to your supervisor that contains the required information and sections discussed below. A summary of possible client audit and fraud risks that you develop from your review of the publicly available information on the U.S. economy and the firm's unaudited 2015 (as stated, you can use the most recent years such as 2016 and 2017) financial statements as well as the limited industrial data provided in the case. Use at least three sources of information; state your sources for the economy and industry analysis. Cite your sources in your client acceptance report. A description of items you recommend the audit firm research concerning ABC's managers that would address their ethical character and qualifications to run a firm like ABC along with a list of possible information sources. Include a short discussion of why you included each item by discussing how it would affect audit and fraud risk. Include three sources of information where you would expect to find this information. A source of information is somewhere you would look to develop this information and can be internal information within the firm, public source, or discussions with parties that might be familiar with ABC's management. Cite your sources. A description of items you recommend the audit firm research concerning ABC's relationships with third parties to include customers, vendors, financial institutions the work with, and legal counsel that would be relevant to assess audit risk. Include possible sources of information for each – where you would expect to find the information. Include a short discussion of why you included each item by discussing how it would affect audit and fraud risk. Include three sources of information (cite your sources). A description of items you recommend the audit firm review internally to determine the need for outside experts on the audit and whether the audit firm is sufficiently independent of ABC. Just provide a general discussion of the sources you would use here. (Hints: The text provides limited information on where to look for client acceptance information in its discussion of the process. However, the sources are similar to the ones it discusses in covering inherent risk assessment. The main difference between the two uses of the information is client confidentiality. Once you have accepted the client, you have much greater access to information. Before you have accepted the client, you will need the client's permission to contact third parties or the third parties will risk legal liability for violating ABC's confidentiality. Thus, your report should consider getting the client's permission where necessary. In addition, client acceptance decisions involve different components of the risk model. When the risk of accepting this client, you need to be clear on which component is at risk. For example, audit risk issues involve risk to the auditor from such things as the risks of future litigation that don't directly affect the risk of material misstatement. Inherent risks involve features of the firm and its environment that will increase the risk of material misstatement.) You probably will not be able to find sources detailing a client acceptance report; however there are many sources of information about a client engagement letter – you can search the internet for the information and include the same type of information that you find for a client engagement letter in your client acceptance report. (c) Draft engagement letter Prepare a draft engagement letter for ABC. The firm name that you made up needs to be at the top of the engagement letter as a letterhead – use the same firm name that you used in (b). Fill in as much of the normal sections of the letter as possible given the information you have gathered. The engagement will only cover the financial statements and not any additional services. You can search the internet for sources of information that would be included in a client engagement letter. Include some of the information that you have included in your client acceptance report.