If the organization already has an auditor who is
ceasing to act, i.e. one firm is replacing another; the professional bodies
require the new auditor to communicate with the previous auditor.
ceasing to act, i.e. one firm is replacing another; the professional bodies
require the new auditor to communicate with the previous auditor.
The professional bodies have specific rules which
their members must follow.
their members must follow.
These are:
·
A member
(of a professional body) on being asked to act to act as should request the
client’s permission to communicate with the previous auditor (if there is one).
A member
(of a professional body) on being asked to act to act as should request the
client’s permission to communicate with the previous auditor (if there is one).
·
If this
permission is refused, the firm must refuse the appointment as auditor.
If this
permission is refused, the firm must refuse the appointment as auditor.
·
If
permission is given the firm should request, in writing :
If
permission is given the firm should request, in writing :
·
Confirmation
that there is no professional reason why the appointment may not be accepted;
Confirmation
that there is no professional reason why the appointment may not be accepted;
·
Any
information required to enable them to decide whether or not they are prepared
to accept the appointment.
Any
information required to enable them to decide whether or not they are prepared
to accept the appointment.
·
Members
receiving such a request should, in turn, request the client’s permission to
discuss the client’s affairs with the proposed new auditor.
Members
receiving such a request should, in turn, request the client’s permission to
discuss the client’s affairs with the proposed new auditor.
·
If this
permission is refused, the outgoing will inform the new auditor who will then
refuse the appointment.
If this
permission is refused, the outgoing will inform the new auditor who will then
refuse the appointment.
·
If
permission is given then the old auditor.
If
permission is given then the old auditor.
·
Confirms
that there is no professional reason why the appointment cannot be accepted.
Confirms
that there is no professional reason why the appointment cannot be accepted.
·
Discloses
to the proposed auditor all information which they will need to decide whether
or not to accept the appointment.
Discloses
to the proposed auditor all information which they will need to decide whether
or not to accept the appointment.
·
Discusses
freely with the new auditor all matters relevant to the appointment which the
new auditor will need to know.
Discusses
freely with the new auditor all matters relevant to the appointment which the
new auditor will need to know.
The reasons for this are:
·
It is a
matter of courtesy between professionals.
It is a
matter of courtesy between professionals.
·
It
enables the proposed auditors to known if tic proper for them accept the
appointment. If, for example, the outgoing auditors are in dispute with the
client over unpaid fees or they feel they being dumped in favors of a new firm
which might be more amenable to signing an audit report and asking fewer questions,
this is the opportunity for the outgoing auditors to say so.
It
enables the proposed auditors to known if tic proper for them accept the
appointment. If, for example, the outgoing auditors are in dispute with the
client over unpaid fees or they feel they being dumped in favors of a new firm
which might be more amenable to signing an audit report and asking fewer questions,
this is the opportunity for the outgoing auditors to say so.
·
It
safeguards the position of the retiring auditors who can express any
reservations they may have.
It
safeguards the position of the retiring auditors who can express any
reservations they may have.
·
It
protects the shareholders and others interested in the final accounts.
It
protects the shareholders and others interested in the final accounts.
The next steps, assuming all the formalities are
completed and there are no problems regarding the appointment, is to agree a
letter of engagement with the client. This sets out the agreement between the
auditor and the client. We look at these in a later section of this chapter.
completed and there are no problems regarding the appointment, is to agree a
letter of engagement with the client. This sets out the agreement between the
auditor and the client. We look at these in a later section of this chapter.
The new auditors must also confirm that they have
been properly and legally appointed. They do this by examining the minute books
of meetings at which they were appointed and placing a copy of the appropriate
minute on a new permanent file (chapter 18). In companies these minutes will be
of the company in general meeting, if they were appointed at the AGM or
meetings of the directors if the appointment is to fill a casual vacancy or is
between AGMs
been properly and legally appointed. They do this by examining the minute books
of meetings at which they were appointed and placing a copy of the appropriate
minute on a new permanent file (chapter 18). In companies these minutes will be
of the company in general meeting, if they were appointed at the AGM or
meetings of the directors if the appointment is to fill a casual vacancy or is
between AGMs
