Main Issue
Potter Smith a national CA firm has enjoyed a good reputation and even though small discrepancies’ have cropped up over the years the impact of the issue in question is intimidating. In 1984 Metro Bank sued PS for the error in the audit of Bouchard Supply Company. The erroneous audit generated by PS (Montreal branch) misrepresented Bouchard’s credibility to Metro Bank. The audits provided by PS will not serve its purpose if banks and other creditors cannot rely on its quality of work. Thus Potter-Smith needs to administer and enforce a better quality control system, so as to gain the assurance of its clients as well as maintain the accounting regulations.
Sub Issue
• Potter Smith mergers are concentrated more on geographical expansion than on the basis of best practices.
• Conforming to deadlines are given priority than to corrected audits and quality control
• Lack of training programs for the employees in PS
• Inadequate periodical performance reviews at PS to measure an employee or team’s skill which is why employee with known limitations continues in the inappropriate designation
• Branches are cutting down workforce as solution to increase profitability.
Analysis (Case Facts Only)
From the 5 different services provided, auditing is the largest source of fees for national CA firms like Potter Smith. Potter Smiths 30 per cent professional fees are obtained from audit services. The audit report provides the statements with credibility and enables 3rd parties (such as banks and other creditors) to rely on the statements with confidence. The financial performance of Potter Smith has been very good until the last few years sin ...