Zzzz Best 5-6

In: Business and Management

Submitted By axonx
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Pages 3
5. Re: Predecessor-successor auditors:
• What is the purpose of predecessor-successor auditor communications?
• Which party, the predecessor or successor auditor, has the responsibility for initiating these communications?
• Briefly summarize the information that a successor auditor should obtain from the predecessor auditor.
(8 points)

SAS 84 (AU 315) defines a predecessor auditor as: an auditor who (a) has reported on the most recent audited financial statements or was engaged to perform but did not complete an audit of the financial statements and (b) has resigned, declined to stand for reappointment, or been notified that his or her services have been, or may be, terminated. The successor auditor is an auditor who is considering accepting or has already accepted an engagement to audit financial statements, but has not been in communication with the predecessor auditor. Communication between the predecessor and successor auditor is very important as it can yield important information as to whether or not the successor auditor should accept the engagement.
There are many possible reasons why the predecessor auditor is no longer serving the client. Whether it was a disagreement on accounting principle, audit procedures, adequate disclosures, limiting the audit scope, or a multitude of other reasons, the successor auditor will need this information in order to make a decision. For this reason, it is the responsibility of the successor auditor to initiate communications with the predecessor auditor. This communication may be written or oral. By rule, auditors are not allowed to disclose confidential information discovered throughout the course of an audit, unless permitted in the Code of Professional Conduct. The potential client may allow the prospective auditor to fully respond to the successor auditor’s questions, but it is the responsibility of the…...

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