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External Audit Chapters 3-6

In: Business and Management

Submitted By ninjablaze
Words 2717
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1. Prospective Client Acceptance: When accepting a new client, which parties could an auditor typically speak to about the client? When accepting a new client that previously had another auditor, is the successor auditor required to communicate with the predecessor auditor? Which party does the burden of initiated contact rest with? Does the predecessor auditor have to get permission from the client before speaking to the successor auditor? What is the purpose of the successor and predecessor communicating?

The successor auditor could speak to the predecessor auditor, local attorneys, other CPAs, banks, and other businesses. For prospective clients that have previously been audited by another CPA firm, the new (successor) auditor is REQUIRED by auditing standards to communicate with the predecessor auditor. The burden of communication rests with the successor auditor but the predecessor is required respond. The predecessor does have to get the client’s permission before making communication with successor auditor. The purpose of communication is to help the successor auditor evaluate whether to accept the engagement.

2. What is the purpose of the engagement letter? What is included in the engagement letter?
Audit standards require that auditors document their understanding with the client in an engagement letter. It includes the engagement’s objectives, the responsibilities of the auditor and management, identification of the financial reporting framework used by management, reference to the expected form and content of the audit report, and the engagement’s limitations. It should also state any restrictions, deadlines and assistance to be provided by the client.

3. What does the auditor have to document about the audit strategy and plan? Documents the nature, timing and extent of the planned audit procedures to be used in order to comply with…...

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