Chapter _5, Planning Issues

Chapter _5, Planning Issues - ACCY360/560 Assurance...

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ACCY360/560 Assurance Services “Basic Audit Planning Considerations” Chapter #5 I. 1 st Standard of Field Work: “The auditor must adequately plan the work and must properly supervise any assistants.” II. Some basic planning-level issues pre-engagement acceptance activities A. See the AICPA’s "Quality Control Standards" (Chapter #19) -- 1 of the 6 elements of a quality control system specifically focuses on clients " firms should avoid clients lacking in integrity or which are too risky! B. When there is a change in auditors new auditor (“successor”) is supposed to communicate with the old auditor (“predecessor”) 1. Inquiry of predecessor is required before accepting this is the successor's responsibility; can be written or verbal (but requires prospective client's permission due to confidentiality considerations; what if the answer is "no"?) a. Facts bearing on management's integrity b. Any disputes over accounting or auditing issues (regarding “opinion shopping” issues) c. Any communications the predecessor had with the audit committee about fraud, illegal acts, and I/C issues d. Predecessor’s understanding of the reason(s) for the change 2. Can also inquire about other matters of interest – e.g., anything that might affect the conduct of the audit (past trouble-spots, etc.) 3. Successor should also get the client's permission to request access to predecessor's working papers (usually those having on-going audit relevance) predecessor should be reasonably accommodating in that regard, but valid reasons may exist to refuse such access 4. Q: What if successor believes that F/S covered by predecessor's report require revision? A: Try to arrange meeting with the 3 parties. If client refuses, run!
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2 III. Responsibilities vary with different types of engagements A. We can eliminate any confusion by obtaining a written “engagement letter" that spells out the respective responsibilities of the client and the CPA, the objectives of the engagement, etc. B.
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This note was uploaded on 04/22/2011 for the course ACCY 360 taught by Professor T during the Spring '08 term at Northern Illinois University.

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Chapter _5, Planning Issues - ACCY360/560 Assurance...

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