Therefore, items of possible interest to you may not have been specifically addressed. If the reaudit is a one-time engagement, the potential reauditor should ask itself why the company did not ask the reauditor to perform the current period audit and might, on that basis, decide not to accept the engagement. Our use of professional judgment for the purpose of this engagement means that matters may have existed that would have been assessed differently by you. So how, a communication between successor and predecessor accountant is conducted? Which of the following would an auditor most likely use in determining overall materiality when planning the audit? See section 316, Consideration of Fraud in a Financial Statement Audit; section 317, Illegal Acts by Clients; and section 325, Communication of Internal Control Related Matters Noted in an Audit. Such audit evidence may include the most recent audited? It is certainly better if the specialist has no relationship and is not provided by the client. Corporate executives and boards of directors view reaudits in conjunction with an auditor change as a way to prove due diligence and satisfy the additional responsibilities imposed on them by the Sarbanes-Oxley Act of 2002.
After performing all necessary procedures a predecessor auditor reissues a prior-period report on financial statements at the request of the client without revising the original wording. An auditor's responsibility to detect illegal acts that have a direct and material effect on the financial statements is the same as that for errors and fraud. Without express consent from the client, the predecessor auditor does not have authorization to discuss confidential information. Making inquiries of the predecessor auditors. Why does a successor auditor need to contact the predecessor auditor? The extent of access is always a matter of the predecessors professional judgment. The anticipated sample size of the planned substantive tests.
The successor auditor may wish to consider other reasonable inquiries. Furthermore, the predecessor auditor is not a specialist as de? If client management has changed, the potential reauditor should see if the current management is willing—and has sufficient knowledge—to provide required management representations at the end of the reaudit. Official positions are determined through certain specific committee procedures, due process and deliberation. This answer is correct because when a predecessor auditor's report is not presented, the successor auditor's report should indicate that 1 the financial statements of the prior period were audited by another auditor, 2 the date of that report, 3 the type of report, and 4 if the report is other than standard, and the reasons therefore. Which of these statements concerning illegal acts by clients is correct? This same contact between the predecessor and successor auditor should also have been documented. Please confirm your agreement with the foregoing by signing and dating a copy of this letter and returning it to us.
Technically, you are supposed to find out the reasons why and decide what to do from there but usually what ends up happening is you would withdrawal from the engagement. If the client refuses to allow the successor to discuss the issue with the predecessor, or if the successor is not satisfied with the resolution of the matter, the successor should evaluate the implications and determine if it is necessary to resign from the engagement. Revised, April 2007, to re? Our use of professional judgment and the assessment of audit risk nd materiality for the purpose of our audit mean that matters may have existed that would have been assessed differently by you. However, the timing of these other communications is more flexible. If the reauditor elects to directly perform confirmation procedures, it should either reconfirm amounts or terms of balances and transactions as of the balance sheet date of the reaudit period, or confirm as of a subsequent date and test intervening transactions.
You agree to advise us promptly and provide us a copy of any subpoena, summons, or other court order for access to your working papers that include copies of our working papers or information otherwise derived therefrom. You consent to our cookies if you continue to use our website. In practice, access to working papers may be denied for several reasons, such as litigation involving the engagement, an incomplete engagement or unpaid audit fees. The successor should use his or her judgment in determining whether the results of the review of these working papers provide enough audit evidence to be used in analyzing the impact of the opening balances and the consistency of accounting principles. Whether or not a specialist may be provided by the client. It is important for the successor auditor to contact the predecessor auditor because they may be able to provide information that will assist the successor auditor in determining whether or not to accept an engagement.
Experience has shown that the predecessor accountant may be willing to grant broader access if given additional assurance concerning the use of the working papers. For audits of fiscal years beginning before December 15, 2010,. The extent, if any, to which a predecessor auditor permits access to the working papers is a matter of judgment. An audit in accordance with generally accepted auditing standards normally includes audit procedures specifically designed to detect illegal acts that have an indirect but material effect on the financial statements. When a successor auditor is appointed to an audit engagement, the successor may need to communicate with the predecessor auditor regarding various issues that are then incorporated into the successor's audit. If the predecessor limits his or her response because of unusual circumstances, such as litigation, that should be disclosed.
Disagreements with management as to accounting principles, auditing procedures, or other similarly signi? Except as permitted by the Rules of the Code of Professional Conduct, an auditor is precluded from disclosing con? Although not required by this section, in these circumstances the successor auditor may? Greenspan had been deceived by his former client, so the potential information would have been highly unreliable. The reauditor may consider confirmation responses the predecessor obtained—provided it can get copies. Analysis of income statement accounts. Appropriate procedures may include tests of prior transactions, reviews of records of prior counts, and the application of analytical procedures, such as gross profit tests. Also, the predecessor auditor should reach an understanding with the successor auditor as to the use of the working papers. Ask the client to arrange a meeting among the three parties to discuss the information and attempt to resolve the matter. This is because common law doctrine generally imposes a gross negligence or fraud standard for recovery by third parties in the event of auditor malfeasance; the Securities and Exchange Act of 1933 allows recovery simply for ordinary negligence.
Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding the predecessor's A. For example, evidence gathered during the current year's audit may provide information about the realizability and existence of receivables and inventory recorded at the beginning of the year. The predecessor auditor may wish to request a consent and acknowledgment letter from the client to document this authorization in an effort to reduce misunderstandings about the scope of the communications being authorized. While it is customary that access be granted, the predecessor should determine which work papers will be available for review, and which will be allowed to be copied. When the most recent financial statements have been compiled or reviewed in accordance with the Statements on Standards for Accounting and Review Services, the accountant who reported on those financial statements is not a predecessor auditor.