ExpertHard1 markMultiple Choice
CPA · Question 02 · Area 1: Ethics
During the acceptance phase of a new audit engagement for a private company, the successor auditor requests permission to make inquiries of the predecessor auditor. The potential client refuses to grant permission. What is the most appropriate course of action for the successor auditor?
During the acceptance phase of a new audit engagement for a private company, the successor auditor requests permission to make inquiries of the predecessor auditor. The potential client refuses to grant permission. What is the most appropriate course of action for the successor auditor?
Answer options:
A.
Accept the engagement but assess control risk at the maximum level.
B.
Accept the engagement and perform alternative procedures to verify opening balances.
C.
Report the refusal to the AICPA Professional Ethics Division.
D.
Decline the engagement because the limitation on information prevents an assessment of management integrity.
How to approach this question
Recall the requirements for initial audits (AU-C 210). Predecessor inquiries are mandatory (with client consent). If consent is withheld, consider the implications for client acceptance.
Full Answer
D.Decline the engagement because the limitation on information prevents an assessment of management integrity.✓ Correct
Decline the engagement because the limitation on information prevents an assessment of management integrity.
AU-C 210 requires the successor auditor to request management to authorize the predecessor to respond to inquiries. If management refuses, the auditor should inquire as to the reasons and consider the implications for accepting the engagement. Generally, a refusal to allow communication regarding management integrity is a significant scope limitation on the acceptance process, usually leading to declining the engagement.
Common mistakes
Thinking alternative procedures can substitute for the integrity assessment provided by the predecessor inquiry.
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