Saturday, March 30, 2019

Auditor Predecessor Successor

Auditor Predecessor re in the altogetheralQuestion What is the purpose of precursor- permutation canvasor communications? Which party, the herald or refilling auditor, has the responsibility for initiating these communications? Briefly summarize the entropy that a successor auditor should obtain from the precursor auditor.The purpose of the antecedent-successor auditor communications is to service an auditor determine if a firm should engage with a new guest. This communication will inform the auditor about the history of the client with the previous auditor and possibly expose some reading that would put forward that evaluate this client is nary(prenominal) in the best interest of the firm. In recent times it has become important to carefully choose with whom a firm engages in an accordance with for representing them as their auditor. none only is the firms personality at stake but they can be held liable for their clients duplicitous activities.The Auditing Standar ds Board has issued a Statement on Auditing Standards Number 84 in October of 1997. SAS No. 84 replaced the SAS No. 7 which has the same title and was write to update the statement to the present environment. SAS No. 84 defines the compulsory communications between the predecessor and successor auditor before pass judgment an fight what to do when the predecessor limits the responses to the successor contains sample client consent and an cite letter and a successor auditor acknowledgement letter. M any of the certified public accountant firms use caution when accepting new clients and go through a detailed procedure before accepting a new client. This is unavoidable to protect the firm from potential prox liabilities based on their clients activities.SAS No. 84 made several modifications or improvements to SAS No. 7 which imply communications prior to engaging with the client, discusses the usage and geeks of working paper, discusses the use of assorted types of correspon dence letters for the predecessor-successor with examples, and outlines actions that the successor should follow if the financial statements are fix to be misstated.This Statement was then amended by no. 93 because the statement didnt address the case where an auditor started an audit but didnt free it. SAS No. 93 clarifies the explanation of the predecessor auditor to include this situation. The definition was refined to include any auditor who is engaged to perform an audit but does not complete it.In the ZZZZ scoop up case study, Greenspan was an item-by-item auditor that completed an audit of the ZZZZ Best Company in 1986. He used analytical techniques to look at the financial data and he confirmed the existence of their jobs by reviewing their rolls. After extent of the audit, Minkow that owned the ZZZZ Best Company dismissed Greenspan and retained Ernst Whinney as the companys auditor. A congressional subcommittee was examine into the predecessor-successor communicati ons that occurred when this transition occurred. When the congressional subcommittee asked what development he provided to the successor auditor, Greenspan was express Nothing. I did there was nothing because they neer got in tough with me. Its communications protocol for the new accountant to get in touch with the old accountant. They never got in touch with me, and its still a mystery to me.According to SAS no. 84, the successor cannot accept the new client until they dupe communicated with the predecessor and have reviewed their responses. Even though the successor is required to initiate the communication, the predecessor is required to respond. The predecessor is required to get permission from the client before providing any information about the client. This means that there is a possibility that the predecessor will state that they will not be providing any information but they must respond stating this. If the predecessor doesnt provide any information, this to the hi ghest degree likely means that the client doesnt want them to disclose some potentially harmful information about the client and raises some concerns about accepting the new client.In the ZZZZ Best Company case, Ernst Whinney said that they communicated with Greenspan prior to accepting ZZZZ Best as an audit client. They didnt state any details associate to the communication and Greenspan did not confirm this communication. Even if Ernst Whinney did initiate communication with Greenspan, presumption that neither one confirmed the details of what was communicated means that Ernst Whinney didnt follow demand of reviewing the predecessor responses before accepting the client.The successor auditor should obtain information that will help decide whether to accept the client as their auditor. The type of information that the successor auditor should be inquiring about is colligate to the fair play of the management and any disagreements that the predecessor had with the management over story or auditing procedures. If theres has been issues with management integrity or concerns about their integrity from the predecessor auditor, it most likely will be an ongoing concern which whitethorn cause problems in the future. Also, if the predecessor auditor had disagreements with the client about accounting system or auditing procedures then it would best to discuss these procedures with the client before get-go the engagement with the client.An early(a) item that the successor auditor should request is retrieve to the predecessors working text file. SAS no. 84 includes a list of the working document ordinarily made available to the successor, including documentation of planning, internal control, audit results and other matters of continuing accounting and auditing significance.1 The predecessor may limit the gravel to this working papers for reasons such as confidentiality agreements or litigations. These working papers provide the good insight into the clien t and give exposure to the predecessor and clients working arrangements. They will be the fastest and most detailed information for evaluating the client.When responding to the successor after the initial communication, the predecessor may request a written agreement disclosing the terms of what they disclose. They may request that the successor carry on the information confidential and agree not to engage in litigations against the predecessor related to the material disclosed.Another item they should discuss is the reasons for the change in auditors. This information could show some insight into any management integrity issues if the predecessor auditor withdrew as the auditor.The successor will need to document the communications with the predecessor. They should document when the communications occurred, the results of the communications, and details of what material was disclosed. Even though the communications may be oral instead of written, it is good serve to document the details of what communications were made and the nature of the communications. SAS No. 84 doesnt require the documentation of this communications but the successor auditors working papers should show the details of communications that occurred.The predecessor-successor auditor communications is the key to ascertain if the firm should accept the new client. This communication will allow profound information to be gathered in determining whether to proceed into an agreement or not. The success auditor must initiate the communication with the predecessor. The completion of this exchange of information is vital to protect the firm from potential future liabilities based on their clients activities.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.