Topics: Auditor's report, Audit, Financial audit Pages: 6 (2259 words) Published: March 12, 2013
ZZZZ Best Case Assignment #2
Question 1: 15 points
AU Section 315 Communications Between Predecessor and Successor Auditors .01-.13Using the facts from the ZZZZ Best case and professional guidance from AU Section 315, explain the following: A. As the successor auditor, what was E&W supposed to do before they accepted ZZZZ Best as an audit client in regards to Greenspan? Summarize in enough detail AU 315.03-.06. In your answer give and support your opinion as to whether or not E&W violated these paragraphs and if you can prove it as a fact. The first thing E&W should have done, as the successor auditor, was to postpone accepting the engagement until the communications in paragraphs .07 through .10 have been evaluated. (AU 315.03) It is the responsibility for the successor auditor to contact the predecessor auditor and hold any information exchanged about ZZZZ Best confidential (AU 315.06). It is important for the successor auditor to contact the predecessor auditor because they may be able to provide information that will assist the successor auditor in determining whether or not to accept an engagement. (AU 315.07) The successor auditor should request permission from the prospective client to make inquiry of the predecessor auditor prior to acceptance of the engagement. If the client refuses, the successor should inquire as to why the client is refusing (AU 315.08). The successor auditor should make inquiries regarding matters that will help the successor auditor determine if they were to accept the engagement and the predecessor auditor should respond promptly and fully. (AU 315.09 and AU 315.10) In my opinion, E&W did violate the standards of what a successor auditor should do regarding the contacting of a predecessor auditor in the case of the ZZZ Best audit. I believe this to be true because Mr. Greenspan (predecessor auditor) testified before Congress that E&W never got in touch with him regarding the restoration contract and the audit that Greenspan performed in general. Since it is normal protocol for the new auditor to contact the old auditor, Greenspan never contacted E&W. However, I cannot prove that E&W never contacted Greenspan since E&W claimed they contacted Greenspan. They were not required to disclose the nature of the communication because the information that was transferred between the predecessor auditor and successor auditor is to be kept confidential (AU 315.06). Since Congress did not recall Greenspan to rebut E&W, proving E&W did not communicate with Greenspan would be difficult. E&W should have contacted Greenspan in writing. E&W did so when they contacted Price Waterhouse and this eliminated any doubt whether contact was made. This same contact between the predecessor and successor auditor should also have been documented. B. Why does a successor auditor need to contact the predecessor auditor? What could the predecessor auditor tell them? Summarize AU 315.07-.09.Did Greenspan know anything about ZZZZ Best that might influence E&W’s decision to accept ZZZZ Best as a client? Defend your opinion with information from the case.

AU 315.07-.09. emphasizes the importance of communication between the predecessor and successor auditors prior to a final engagement between the successor auditor and the prospective client. AU 315 .07 states that gathering information from the predecessor auditor is a critical step of the engagement process because this can provide valuable insight in terms of accounting and auditing disagreements with the former client. For Instance, it does not appear that information that could have been provided by Greenspan to E&W would had ultimately change the fact that they decided to work with ZZZZ Best since, at the time, there was no record of Greenspan having any type of disputes with his former client. Furthermore, AU 315 .08 states that the successor auditor is to make an inquiry to the potential client...
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