Question

When a prospective client refuses to permit the predecessor auditor to respond, the successor auditor should ______.

Answer 1

When a prospective client refuses to allow communication with the predecessor auditor, a successor auditor should assess the situation cautiously, considering professional standards and potential risks. If necessary, they may discuss the matter with the client and if the refusal is unreasonable or precludes obtaining sufficient audit evidence, they may decide against accepting the engagement.

Step-by-step explanation:

When a prospective client refuses to permit the predecessor auditor to respond, the successor auditor should carefully consider the implications of this refusal. Professional standards require that a successor auditor obtain responses from the predecessor auditor regarding matters such as the predecessor auditor's understanding of the reasons for the change of auditors, and any other matters that might affect the acceptance of the engagement. This communication is an essential part of the successor auditor's due diligence and helps in identifying any issues that could impact the audit. Without this information, the successor auditor may face undisclosed risks and challenges. The successor auditor should proceed with caution, assess the reasons for the refusal, and consider the potential ethical and professional implications. They may also need to discuss the matter with the client to understand the reasons behind the refusal and determine whether it is possible to proceed with the engagement in compliance with professional and ethical requirements.

If the client's refusal appears unreasonable or the successor auditor cannot obtain sufficient appropriate audit evidence, they may decide not to accept the engagement. It is important to note that the lack of communication with the predecessor auditor can be a significant limitation and may be a deterrent to accepting the assignment. The successor auditor's decision-making process should be thoroughly documented, including the client's refusal and its implications on the ability to perform a quality audit.

Answer 2

When a prospective client does not allow a predecessor auditor to respond, the successor auditor should evaluate the reason for refusal, consider the associated risks, and possibly decline the engagement if necessary.

Step-by-step explanation:

When a prospective client refuses to permit the predecessor auditor to respond, the successor auditor should carefully consider the implications of this refusal on the engagement. According to professional standards, such a refusal can be a sign of potential problems or disputes between the client and the predecessor auditor. The successor auditor should take additional steps to assess the risks associated with accepting the engagement. This includes understanding the reasons behind the refusal and whether it might be indicative of issues such as disagreements over accounting principles, disputes concerning auditing procedures, or possible management integrity issues.

Communication between predecessor and successor auditors is considered necessary due diligence in an audit engagement transition. If the client does not allow this communication, the successor auditor must evaluate the reasons for the refusal and attempt to gather information through other avenues, if possible. This might include discussions with other parties who are knowledgeable about the company's finances and operations, such as its legal counsel, bankers, or regulators.

The successor auditor should also consider discussing the matter with the client to clarify any concerns or misunderstandings. If the refusal continues and the successor auditor feels that it limits their ability to perform a proper audit, they may have no choice but to decline the engagement. It is important for the successor auditor to document their inquiries, the client's refusal, and the reasons for the decision made regarding acceptance or continuation of the audit engagement.