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 …show more content…

Hood. Company officers believe that Mt. Hood’s operations are in substantial compliance with all environmental laws.
Mt. Hood Furniture, Inc. is family owned and not publicly traded; 1 million shares of $1 par common stock are authorized. Major stockholders include the founder, who recently retired as chairman of the board, Robert S. Saws. He holds 30 percent of the outstanding shares. Mr. Saws is 70 years old and until his retirement was closely involved in all major decisions affecting the company. He personally signed corporate checks and supervised the company’s operations. He is very proud of his company’s strong reputation for being ethical and for meeting its commitments and promises. His son, Conrad P. Saws, has worked in the business for the last 15 years, is the current president and chairman of the board, and under his father’s guidance during the last 5 years, has assumed the responsibility of overseeing the business’s day-to-day operations. Conrad is also a 30 percent owner. Other family members own an additional 30 percent of the business. The chief operating officer (COO) and chief financial officer (CFO) are the only nonfamily owners at 5 percent each. Mt. Hood’s senior management is comprised of Conrad Saws, the president and chairman of the board; James Doyle, the COO; and Julia Anderson, the CFO. Doyle joined the company two years