Question

Before accepting an engagement to audit a new client, a CPA is required to obtain

A. An understanding of the prospective client's industry and business.
B. The prospective client's signature on the engagement letter.
C. A preliminary understanding of the prospective client's control environment.
D. The prospective client's consent to make inquiries of the predecessor auditor, if any.

Answer 1

A CPA must obtain the prospective client's consent to make inquiries of their predecessor auditor before accepting a new audit engagement, as it is a key requirement for understanding potential issues that could affect the audit.

Step-by-step explanation:

Before accepting an engagement to audit a new client, a CPA is required to obtain the prospective client's consent to make inquiries of the predecessor auditor, if any. This step is crucial for understanding any matters that might influence the CPA's willingness to accept the engagement, such as disagreements with management or issues regarding accounting principles.

Additionally, while the CPA will eventually need to understand the client's industry, business, and control environment, and will have to obtain a signature on the engagement letter, the immediate ethical and professional requirement is to communicate with the predecessor auditor in accordance with AICPA and other relevant professional standards.