AICPA Professional Standards state that the successor auditor should inquire of the predecessor about 5 specific matters: (1) information that might bear on the integrity of management; (2) disagreements with management as to accounting principles, auditing procedures, or other similarly significant matters; (3) communications to those charged with governance regarding fraud and illegal acts by clients; (4) communications to management and those charged with governance regarding significant deficiencies and material weaknesses in internal control; and (5) the predecessor auditor's understanding as to the reasons for the change of auditors.
What should a successor auditor do before accepting an audit engagement?
Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding the predecessor's... A. Awareness of the consistency in the application of generally accepted accounting principles between periods. B. Evaluation of all matters of continuing accounting significance.
What inquiries should be made of the predecessor auditor?
The inquiries that should be made of the predecessor auditor include: The predecessor’s understanding as to the reasons for the change in auditors. The predecessor auditor is required to respond promptly and fully, on the basis of known facts, to the successor auditor’s reasonable inquiries.
When does a predecessor respond to a client's audit proposal?
If a client asks for proposals from several auditors, the predecessor is not expected to respond to inquiries until one auditor conditionally accepts the engagement subject to required communications. Predecessors response to the successor.
What is the predecessor and successor audit Communications Section?
.01 This section provides guidance on communications between predecessor and successor auditors when a change of auditors is in process or has taken place. It also provides communications guidance when possible misstatements are discovered in financial statements reported on by a predecessor auditor.
What kind of inquiries do you think should be asked by the successor auditor to the predecessor auditor?
In such cases, the successor auditor may consider the knowledge obtained from his or her review of the predecessor auditor's working papers and inquiries of the pre- decessor auditor to determine the nature, timing, and extent of procedures to be applied in the circumstances.
What is the responsibility of a successor auditor to communicate with the predecessor auditor in connection with a prospective new client?
What is the responsibility of a successor auditor with respect to communicating with the predecessor auditor in connection with a prospective new audit client? The successor auditor should obtain permission from the prospective client to contact the predecessor auditor. Engagements are adequately supervised.
What information should a successor auditor obtain during the inquiry of the predecessor auditor prior to acceptance of the audit?
i) Information about integrity of management. ii) Disagreement with management concerning auditing procedures. iii) Review of internal control system.
What are the responsibilities of the successor and predecessor auditor when a company is changing auditors?
Terms in this set (6) what are the responsibilities of the successor and predecessor auditors when a company is changing auditors? the new auditor who is the successor is required to initiate communication with the predecessor auditor in order to help determine whether to accept the engagement.
What is the purpose of Predecessor Successor auditor communications?
The purpose of the predecessor-successor auditor communications is to help an auditor determine if a firm should engage with a new client.
What is the primary purpose of this communication between the new successor and old predecessor auditors?
The purpose of the communication is to help the successor auditor evaluate whether to accept the engagement. While the burden of initiating the communication rests on the successor auditor, the predecessor auditor must respond to the request for information.
Which of the following inquiries should be made of a predecessor auditor before?
The successor auditor should contact the predecessor auditor prior to final acceptance of the engagement. The successor auditor normally reviews the predecessor's audit documentation relating to planning, internal control, audit results, balance sheet accounts, and contingencies. Thus, this is the correct answer.
Which of the following would a successor auditor ask the predecessor auditor to provide after accepting an audit engagement?
Which of the following would a successor auditor ask the predecessor auditor to provide after accepting an audit engagement? Matters that may facilitate the evaluation of financial reporting consistency between the current and prior years.
When one auditor succeeds another the successor auditor should request?
9. The successor auditor should request the client to authorize the predecessor to allow a review of the predecessor's working papers.
What is the primary purpose of reviewing predecessor auditor's workpapers?
In addition, the client acknowledges that the purpose of the working papers review is to obtain an understanding of the client and the predecessor's audit to assist the successor in planning the current audit.
Which of the following statements is true regarding an auditor's communications with a predecessor auditor prior to engagement acceptance?
Which of the following statements is true regarding an auditor's communications with a predecessor auditor prior to engagement acceptance? Inquiries addressing specific matters are required; or example, the predecessor's understanding for the reasons for the change in auditors.
What will an auditor who has been proposed for an audit engagement usually do prior to accepting a new client?
Discuss the factors an auditor should consider before accepting a company as an audit client. Answer: The auditor should investigate and consider the prospective client's standing in the business community, financial stability, management's integrity, and relations with its bankers, attorneys, and previous CPA firm.
What is successor auditor?
The term successor auditor refers to an auditor who is considering accepting an engagement to audit financial statements but has not communicated with the predecessor auditor as provided in paragraphs .07 through .10 and to an auditor who has accepted such an engagement.
What should a successor auditor do during a reaudit?
The successor auditor should communicate to the predecessor auditor any information that the predecessor auditor may need to consider in accordance with section 561, Subsequent Discovery of Facts Existing at the Date of the Auditor's Report, which sets out the procedures that an auditor should follow when the auditor subsequently discovers facts that may have affected the audited financial statements previously reported on. fn 9
What should successor auditors bear in mind?
The successor auditor should bear in mind that, among other things, the predecessor auditor and the client may have disagreed about accounting principles, auditing procedures, or similarly significant matters.
What happens if a prospective client refuses to permit the predecessor auditor to respond or limits the response?
If a prospective client refuses to permit the predecessor auditor to respond or limits the response, the successor auditor should inquire as to the reasons and consider the implications of that refusal in deciding whether to accept the engagement.
Why is an inquiry of the predecessor auditor necessary?
Inquiry of the predecessor auditor is a necessary procedure because the predecessor auditor may be able to provide information that will assist the successor auditor in determining whether to accept the engagement.
What is the footnote 7 of the 'Before permitting access to the working papers'?
Paragraph .11, footnote 7, of this section states, "Before permitting access to the working papers, the predecessor auditor may wish to obtain a written communication from the successor auditor regarding the use of the working papers." The following letter is presented for illustrative purposes only and is not required by professional standards.
What should a predecessor auditor respond to?
The predecessor auditor should respond promptly and fully, on the basis of known facts, to the successor auditor's reasonable inquiries. However, should the predecessor auditor decide, due to unusual circumstances such as impending, threatened, or potential litigation; disciplinary proceedings; or other unusual circumstances, not to respond fully to the inquiries, the predecessor auditor should clearly state that the response is limited. If the successor auditor receives a limited response, its implications should be considered in deciding whether to accept the engagement.
What is successor auditor?
The term successor auditor refers to an auditor who is considering accepting an engagement to audit financial statements but has not communicated with the predecessor auditor as provided in paragraphs .07 through .10 and to an auditor who has accepted such an engagement.
What should a successor auditor bear in mind?
The successor auditor should bear in mind that, among other things, the predecessor auditor and the client may have disagreed about accounting principles, auditing procedures, or similarly significant matters. .08 The successor auditor should request permission from the prospective client to make an inquiry of the predecessor auditor prior ...
Why is a 07.07 inquiry necessary?
.07 Inquiry of the predecessor auditor is a necessary procedure because the predecessor auditor may be able to provide information that will assist the successor auditor in determining whether to accept the engagement. The successor auditor should bear in mind that, among other things, the predecessor auditor and the client may have disagreed about accounting principles, auditing procedures, or similarly significant matters.
Can successor auditor comment on PCAOB?
The successor auditor will not comment, orally or in writing, to anyone as a result of the review as to whether the predecessor auditor's engagement was performed in accordance with the standards of the PCAOB.
Can a predecessor auditor access a working paper?
Even with the client's consent, access to the predecessor auditor's working papers may still be limited. Experience has shown that the predecessor auditor may be willing to grant broader access if given additional assurance concerning the use of the working papers.
Should successor auditors make reference to the report or work of the predecessor auditor?
In reporting on the audit, the successor auditor should not make reference to the report or work of the predecessor auditor as the basis, in part, for the successor auditor's own opinion.
Do successor auditors have to hold in confidence?
Both the predecessor and successor auditors should hold in confidence information obtained from each other. This obligation applies whether or not the successor auditor accepts the engagement.
What should a successor auditor request?
If the successor auditor becomes aware of information that leads him to believe that the financial statements reported on by the predecessor auditor may require revision, the successor auditor should request that the client inform the predecessor auditor and arrange for the parties to meet to resolve the matter.
What is a predecessor auditor?
84, the term predecessor auditor refers to an auditor who has either reported on the most recent audited financial statements, was engaged to perform, but did not complete an audit of any subsequent financial statements, or has resigned, declined to be reappointed, or has been terminated.
What is SAS 84?
“SAS No. 84, Communications Between Predecessor and Successor Auditors, supersedes SAS No. 7, and among other things, (a) revises the definitions of predecessor and successor auditors, (b) adds additional inquiries that the successor must make of the predecessor before an engagement can be accepted, (c) clarifies the successor auditor’s responsibility with respect to obtaining evidence, (d) expands the predecessor’s working papers normally made available to the successor, and (e) provides an example client consent and acknowledgment letter and an example successor auditor acknowledgment letter. SAS No. 84 is effective with respect to acceptance of an engagement after, March 31, 1998, with earlier application encouraged.”
What should be held in strict confidence between successor auditors?
All communications between predecessor and successor auditors should be held in strict confidence. The initiative for communicating rests with the successor auditor, and may be either written or oral. The successor auditor should request permission from the prospective (at this point) client to make an inquiry of the predecessor auditor, ...
When was SAS 84 effective?
SAS No. 84 is effective with respect to acceptance of an engagement after, March 31, 1998, with earlier application encouraged.”. SAS No. 84, Communications Between Predecessor and Successor Auditors, supersedes SAS No. 7, and establishes new standards for the auditor in documenting communications between the successor and predecessor auditors.
Does SAS 84 require a letter of communication?
SAS no. 84 will likely require that all auditors modify their standard communication letter to include the required components listed above. Many auditors have been very lax about performing the required communications, but SAS No. 84 clearly reemphasizes the requirement to document this important process.
How does an auditor become a successor auditor?
An auditor becomes the successor auditor after the prospective client extends an offer to perform the engagement; at this point the successor auditor can communicate with the predecessor. The Key Points. Below are the main points of the new SAS and how they affect auditors and the clients they serve. Required communications.
When is a predecessor expected to respond to an inquiry?
If a client asks for proposals from several auditors, the predecessor is not expected to respond to inquiries until one auditor conditionally accepts the engagement subject to required communications. Predecessors response to the successor. A predecessor should respond fully to the successors inquiries.
What does SAS 84 mean?
SAS no. 84 says, The predecessor auditor should respond promptly and fully, on the basis of known facts, to the successor auditors reasonable inquiries. a predecessor who limits his or her response to the inquiries should tell the successor auditor that this is the case.
What information is considered in a reaudit?
In a reaudit, the successor may consider the information obtained from inquiries of the predecessor and the review of the predecessors audit report and the prior working papers. However, this information alone is not sufficient for the successor to render an opinion; additional audit work is necessary.
What are the key points of the new SAS?
KEY POINTS OF THE NEW SAS include required communications and the need to evaluate these communications before accepting an engagement . THE NEW SAS ALSO DISCUSSES what to do when the predecessor limits responses to the successor or prevents full access to prior-year working papers.
When is SAS 84 effective?
Effective date. SAS no. 84 is effective with respect to acceptance of an engagement after March 31, 1998. Frequently Asked Questions.
Should a predecessor respond to a successor auditor?
A predecessor should respond fully to the successors inquiries. However, a predecessor who limits his or her response should let the successor auditor know this is the case. Litigation, disciplinary proceedings or other such unusual circumstances may result in a limited response.
Introduction
Change of Auditors
Successor Auditor's Use of Communications
Audits of Financial Statements That Have Been Previously Audited
Effective Date
Appendix A
- .24
1.Paragraph .11 of this section states, "The successor auditor should request that the client authorize the predecessor auditor to allow a review of the predecessor auditor's working papers. The predecessor auditor may wish to request a consent and acknowledgment letter from the cli…
Appendix B
Introduction
Change of Auditors
Successor Auditor's Use of Communications
Audits of Financial Statements That Have Been Previously Audited
Effective Date
Appendix A - Illustrative Client Consent and Acknowledgment Letter
- .24 1.Paragraph .11 of this section states, "The successor auditor should request that the client authorize the predecessor auditor to allow a review of the predecessor auditor's working papers. The predecessor auditor may wish to request a consent and acknowledgment letter from the client to document this authorization in an effort to reduce misun...
Appendix B - Illustrative Successor Auditor Acknowledgment Letter