Understanding the client and its governance Ajax Inc. is a public company and a new client of…

Understanding the client and its governance

Ajax Inc. is a public company and a new client of Hawthorne Partners, a medium-sized audit firm. Jeffrey Rush is the engagement partner on the audit and has asked the members of the audit team to begin the process of gaining an understanding of the client, in accordance with AS 2110. One audit manager leads the group investigating the industry and economic factors, and another helps Jeffrey consider issues at the entity level. Jeffrey will hold discussions with members of the audit committee and will discuss a wide range of issues. He has a meeting arranged for next week with the four members of the audit committee, including the chair of the committee, Stella South, who, like the other members of the audit committee, is an independent director.


a. Access AS 2110 at the PCAOB website (www.pcaobus.org). Make a list of the main factors that will be considered by each audit manager’s group.

b. Based on the information; can you conclude that Ajax Inc. complies with Section 301 of the Sarbanes-Oxley Act regarding its audit committee? Explain.



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