The successor auditor also may perform some additional procedures, including making inquiries of the predecessor that will help in expressing an audit opinion. When the auditor concludes that a substantial doubt exists about an entitys ability to continue as a going concern for a reasonable period of time, she should include an emphasisofmatter paragraph following the opinion paragraph in the auditors report to describe the. Initial audit engagement opening balances auditing homework. An auditor who is considering accepting a reaudit engagement is considered to be a successor auditor and the previous auditor is a predecessor auditor under sas no. The auditor who no longer audits that client is the predecessor auditor. After performing all necessary procedures the predecessor.
Predecessor auditors may reissue their report on financial statements as long as the report is still appropriate. Opening balances do not contain misstatements that material affect the current financial statements. In considering reissue requests, the firm is effectively being asked to reestablish a relationship with a former client. In my practice of predecessorsuccessor auditor i have never charged such a fee. D information about the entitys ability to continue as a going concern is not disclosed this answer is correct. However, see section 711 fn as to an auditors responsibility when his report is included in a registration statement filed under the securities act of 1933 and see section 508. However, the current presentation of the prior period statements or the occurrence of subsequent events may make the previous report inappropriate. The committee was asked to clarify whether ias 10 permits only one date of authorisation for issue when considered in the context of. Audit standards require that successor auditors communicate with predecessor auditors prior to accepting an engagement. Public offering documents a generic term defined as. The first part of this article discussed the basic requirements of auc section 700, forming an opinion and reporting on financial statements. The financial statements are not restated and the report is not revised.
Callable bond is a bond the issuer has the right to pay off at issuers discretion. A former client requests a predecessor auditor to reissue an audit report on a prior periods financial statements. Feb 27, 2000 in this study we investigate relations between the quality levels of successor and predecessor auditors for a sample of clientinitiated auditor switches. Any document issued by an entity pursuant to statutory or regulatory requirements relating to shares or debentures on which it is intended that a third party. In my practice of predecessor successor auditor i have never charged such a fee.
The client has notified the auditor that his or her contract will not be renewed for future audits. Before reissuing the prior years auditors report on the financial statements of a former client, the predecessor auditor should obtain letters of representation from. Predecessor auditor an auditor who was previously the auditor of a company and who has been replaced by another auditor. According to auditing standards, explanatory language added at the. Filter by location to see auditor ii salaries in your area. Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding the predecessors which of the following matters generally is included in the auditors engagement letter. In cases in which the predecessor auditor has ceased.
That statement is required in the auditor s report even. After performing all necessary procedures, the predecessor auditors reissue a priorperiod report on financial statements at the request of the client without revising the original wording. Examine significant transactions or events since the date of previous issuance. Jul 08, 2014 hey there, why do predecessor auditor need to reissue the report on the financial statements as long as the report is still appropriate. A successor auditor is the outside auditor of an organization that replaces the predecessor auditor.
The purpose of the predecessorsuccessor auditor communications is to help an auditor determine if a firm should engage with a new client. Predecessor auditor is the auditor of a client for a prior year who no longer audits that client. A6 states that the predecessor auditor may request that the successor auditor confirm in writing his or her agreement regarding the use of the predecessor auditors audit documentation before permitting access to it. We use reasons reported by managers for changing auditors to investigate whether those reasons are differentially related to changes in the quality levels of successor and predecessor auditors. This situation arises in any of the following circumstances. Request the predecessor auditor to reissue the prior years report.
I am out of date, but whilst i have not worked on an audit since the 1990s, and have not worked on the audit of any large entities since the 1980s, i can guess that most audit firms would want to keep confidential their audit approachmethod, for no other reason than it is a fairly valuable piece of intellectual property, its writing creation possibly involving thousands of man hours. What is the purpose of predecessorsuccessor auditor. Predecessor auditors, however, cannot share confidential client information without the permission of the client. Indicate in the auditoras report that the predecessor auditor expressed an unqualified opinion. Briefly summarize the information that a successor auditor should obtain from the predecessor auditor.
We find that this positive association is driven by language that references the. Aicpa issues new standard on communications between predecessor and successor auditors by gary a. Solved audit standards require that successor auditors. Oct 02, 2016 a predecessor auditor who has been asked to reissue his or her report published on october 2, 2016 october 2, 2016 11 likes 1 comments. Communications between predecessor and successor auditors 17 communications to management and those charged with governance regarding signi. Reference in auditor s standard report to managements report. The successor auditors should contact the predecessors regardless of whether the prospective client authorizes contact. A reaudit is an engagement in which an auditor is asked to audit and report on financial statements that have been previously audited and reported on. The agreed terms would need to be recorded in an audit engagement letter or other suitable form of contract. In addition the predecessor might not be independent under sec rules, meaning another firm must do the reaudit. Request that the predecessor auditor reissue the prior years report. Reference in auditors standard report to managements report. This installment expands on that theme, providing guidance for when an auditor is requested to reissue an audit report as a predecessor.
A former client requests a predecessor auditor to reissue an. The financial statements for the prior period were audited by a predecessor auditor. That statement is required in the auditors report even. Quality levels of predecessor and successor auditors. A predecessor auditor is an auditor who conducted the audit for a client in prior periods, but who no longer does so. In the relatively rare case when a predecessor auditor agrees to issue a new report on the restated financial statements of a nonsec issuer, including a notforprofit or governmental entity, the successors report should make no reference to the predecessor s audit of the restatement adjustments auc section 700.
Subsequent events and subsequently discovered facts aicpa. Nov 23, 2014 before reissuing a report which was previously issued on the financial statements of a prior period, a predecessor auditor should. If the predecessor auditor was the principal auditor of a group of companies and a successor is appointed. Reissuing an audit report on comparative financial statements. As modified, effective december 31, 1980, by sas no. Reissue the fss, why this topic has 5 replies, 4 voices, and was last updated 3 years, 1 month ago by run. A former client requests a predecessor auditor to reissue. Audit standards require that successor auditors communicate. After performing all necessary procedures the predecessor auditors reissue a priorperiod report on financial statements at the request of the client without revising the original wording.
In an ipo filing, the commission requires predecessor auditor reports to accompany a subsequent report. Understanding as to the reasons for the change of auditors. Which statement is correct relating to a potential successor auditors responsibility for communicating with the predecessor auditors in connection with a prospective new audit client. In this study we investigate relations between the quality levels of successor and predecessor auditors for a sample of clientinitiated auditor switches. An auditor issued an audit report that was dual dated for a subsequent event occurring. What is the purpose of predecessorsuccessor auditor communications. This means a company might have to ask a predecessor to reissue its audit report. Thus, the successor auditor conducts the audit for the current year when there was a predecessor auditor in the immediately preceding year. I am part of a supervisory committee for a credit union and we just hired a new auditor. Initial audit engagement opening balances auditing.
Isa 510, initial audit engagements opening balances. Does auditor explanatory language in unqualified audit reports. A6 states that the predecessor auditor may request that the successor auditor confirm in writing his or her agreement regarding the use of the predecessor auditor s audit documentation before permitting access to it. Which party, the predecessor or successor auditor, has the responsibility for initiating these communications. Subsequent to the issuance of an auditors report, the auditor became aware of facts existing at the report date that would have affected the report had the auditor then been aware of such facts. This communication will inform the auditor about the history of the client with the previous auditor and possibly expose some information that would suggest that accepting this client is not in the best. Successor auditor is the auditor of a client for the current year when that client had another auditor in prior years. Inevitably, the predecessor auditor will incur some costs associated with complying with this legal obligation. Salary estimates are based on 12,216 salaries submitted anonymously to glassdoor by auditor ii employees. The once and future auditors journal of accountancy.
How much should a predecessor auditor charge a client when. Unless the time spent is more than a few hours, i dont think it is worth the hassle of preparing additional engagement letter, getting authorisation letter from the client, get hold harmless letter form the successor, do and collect the bill. In the relatively rare case when a predecessor auditor agrees to issue a new report on the restated financial statements of a nonsec issuer, including a notforprofit or governmental entity, the successors report should make no reference to the predecessors audit of the restatement adjustments auc section 700. In planning to use the internal auditors to help in performing the audit, the independent auditor most likely will during the initial planning. While performing an audit of the financial statements of a company for the year ended december 31, year 1, the auditor notes that the companys sales increased substantially in december, year 1, with a corresponding decrease in january, year 2.
When the auditor concludes that a substantial doubt exists about an entitys ability to continue as a going concern for a reasonable period of time, she should include an emphasisofmatter paragraph following the opinion paragraph in the auditors report to. A predecessor auditor ordinarily would be in a position to reissue the original report on the financial statements of a prior period at the request of a former client only if able to make satisfactory arrangements with the former client that enable the performance of the procedures described below. The purpose of the predecessor successor auditor communications is to help an auditor determine if a firm should engage with a new client. Reporting on restatement adjustments after an auditor change. Can auditor take photocopies of predecessors working. If the financial statements of a prior period have been audited by a predecessor auditor whose report is not presented, the successor auditor should indicate in an othermatter paragraph of the report 1 that the financial statements of the prior period were audited by another auditor, 2 the date of the previous report, 3 the type of report issued by the. Management board on october 27, 2017, was reissued at the. After performing all necessary procedures a predecessor auditor reissues a priorperiod report on financial statements at the request of the client without revising the original wording. A predecessor auditor who has been asked to reissue his or her report published on october 2, 2016 october 2, 2016 11 likes 1 comments.
A predecessor auditor who provides relevant information to the successor will not be expected first to obtain his former clients permission, as the predecessor is subject to a legal duty to provide such information. The successor must discuss with the predecessor matters bearing on the engagement prior to accepting the engagement. The current auditor is often asked to submit a proposal to be evaluated with the others. New standard on communications between predecessor and. Hey there, why do predecessor auditor need to reissue the report on the financial statements as long as the report is still appropriate. Subsequent to the issuance of an auditors report, the. Reissuing an audit report on comparative financial. After determining that the information is reliable, the auditor should next. The successor auditor should communicate to the predecessor auditor any information that the predecessor auditor may need to consider in accordance with as 2905, subsequent discovery of facts existing at the date of the auditor s report, which sets out the procedures that an auditor should follow when the auditor subsequently discovers facts. This part outlines the content of auditors reports and makes reference to the illustrative reports in the application section of the standard. The predecessor auditor just sent us a bill for 8 hours of work to prepare the workpapers. Before reissuing a report which was previously issued on the financial statements of a prior period, a predecessor auditor should. If the financial statements of a prior period have been audited by a predecessor auditor whose report is not presented, the successor auditor should indicate in an othermatter paragraph of the report 1 that the financial statements of the prior period were audited by another auditor, 2 the date of the previous report, 3 the type of report issued by the predecessor. A predecessor auditor who has been asked to reissue his or.
Extant isa 510 restricts the circumstances when the auditor can express an unmodified opinion. The predecessor must always respond fully to all inquiries made by the successor auditor. Communications between predecessor and successor auditors. Successor auditor information request accountingweb. Briefly summarize the information that a successor. Related courses how to conduct an audit engagement.
Obtain a letter of representations from the predecessor concerning any matters that might affect the successors opinion. Deutsche bank plays its part in driving economic growth and ultimately social progress. Can auditor take photocopies of predecessors working papers. It is reasonable that the predecessor should recover such costs, which might include copying costs, and time spent answering enquiries from the successor. Access to audit working papers means granting the client, another auditor, or other third party the right to inspect the audit working papers which were prepared by the auditor in support of a particular audit engagement, in their entirety or in part. Jun 29, 2018 a successor auditor is the outside auditor of an organization that replaces the predecessor auditor. The predecessor auditor may reissue the audit report on the prior period with. Illustrative successor auditor acknowledgment letter ref. What dates should the predecessor auditor use in the reissued report. Psa 210 psa 210 terms of audit engagements the auditor and the client should agree on the terms of the engagement. Gearing is the proportion of the capital employed of a company that is financed by lenders rather than shareholders.
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