Assume that Smith & Smith, CPAs, audited Apollo Shoes Inc., last year. Now CEO Larry Lancaster wishes to engage Anderson, Olds, and Watershed, CPAs (AOW) to audit its annual financial statements. Lancaster is generally pleased with the services provided by Smith & Smith, but he thinks the audit work was too detailed and interfered excessively with normal office routines. AOW has asked Lancaster to inform Smith & Smith of the decision to change auditors, but he does not wish to do so. Required: List and discuss the steps AOW should follow with regard to dealing with a predecessor auditor and a new client before accepting the engagement.
Answer to relevant QuestionsThe president of Allpurpose Loan Company had a genuine dislike for external auditors. Almost any conflict generated a towering rage. Consequently, the company changed auditors often. The firm of Wells & Ratley (W& R), CPAs, ...Why do auditors need to be aware of their clients’ business risks?What is meant by the nature of the company? How do the professional audit standards differ for (a) errors, (b) frauds, (c) direct- effect noncompliance, and (d) indirect- effect noncompliance?The risk of material misstatement is composed of which audit risk components? a. Inherent risk and control risk. b. Control risk and detection risk. c. Inherent risk and detection risk. d. Inherent risk, control risk, and ...
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