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mes25435_ch01_001-032.indd 19 26/05/11 9:24 PM Conﬁrming Pages 20 Part 1 Introduction to Assurance and Financial Statement Auditing Client Acceptance/Continuance Professional standards require that public accounting ﬁrms establish policies and procedures for deciding whether to
accept new clients and to retain current clients. The purpose of such policies is
to minimize the likelihood that an auditor will be associated with clients who
lack integrity. If an auditor is associated with a client who lacks integrity, the risk
increases that material misstatements may exist and not be detected by the auditor. This can lead to lawsuits brought by users of the ﬁnancial statements. For
a prospective new client, the auditor is required to confer with the predecessor
auditor and the auditor frequently conducts background checks on top management. The knowledge that the auditor gathers during the acceptance/continuance process provides valuable understanding of the entity and its environment,
thus helping the auditor assess...
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This note was uploaded on 12/08/2012 for the course ACCT 564 at Washington University in St. Louis.