Kellen Electronics, Inc. (KEI), a public company, has been experiencing negative cash flows from operations and deteriorating profit margins. Recent press releases have been quite pessimistic, and the company's stock price is in a downward trend. How would an auditor interpret this negative information with regard to a potential audit client? How would your answer be different if this was a continuing client?

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The Answer of Kellen Electronics, Inc. (KEI), a public company, has been experiencing negative cash flows from operations and deteriorating profit margins. Recent press releases have been quite pessimistic, and the company's stock price is in a downward trend. How would an auditor interpret this negative information with regard to a potential audit client? How would your answer be different if this was a continuing client?