1. AU 315 is the professional standard used to provide relevance to client acceptance decision. The successor auditor initiates communication with predecessor auditor. The communication may inform the successor auditor that the client lacks integrity or had disputes over accounting principles, audit procedures or fees. The communication from the predecessor auditor must be received before the audit engagement can be accepted. Besides communication with the previous auditor, the firm should contact local banks, lawyers, other CPA firms and other business. The firm should also do background check on the potential client.
2. If John Jones suggested I offer him a loan and instead of offering an asset as collateral he offered a lump sum of cash that covered the whole amount of the loan, warning signs would of went on in my head. This transaction would never transpire if this was my accounting office. CPA has a professional and moral responsibility to report illegal activities of clients. The illegal activity should be reported to the board or the audit committee, if these shows no resolve than contacting the proper authorities.
3. Forehand, his wife, children, employees, client of the audit company and Jones were affected by Forehands cooperation with Jones. His responsibility to himself, his wife and children was to uphold a reputation that would no tarnish the family reputation. To his employees and clients he was responsible to show he was an independent auditor with integrity. To John Jones he was responsible to demonstrate to him that he was an auditor that followed the law and was not willing to bend the rules for him. Forehands family was affected by him being imprisoned and the income he brought he provided for them. His workers were suffered by a loss of employment and the reputation because of their employers association with a money laundered scheme. Forehand and Jones suffered imprisonment from Forehands ability to say no to the loam...
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