Company XYZ, a publicly traded entity, has been working with Auditor A for several years. However, due
Question:
Company XYZ, a publicly traded entity, has been working with Auditor A for several years. However, due to regulatory changes and a commitment to periodic rotation, the company's board decides to initiate the process of appointing a new auditor. The selection of a new auditor involves a thorough evaluation of potential candidates and compliance with legal and regulatory requirements.
Procedure:
Request for Proposals (RFP):
Company XYZ initiates the process by issuing an RFP, inviting audit firms to submit their proposals. The RFP outlines the company's expectations, audit scope, and the criteria for evaluation.
Evaluation of Proposals:
The board and the audit committee review the proposals received from various audit firms. They consider factors such as experience, expertise, independence, and the proposed audit fees.
Interviews and Presentations:
Shortlisted audit firms are invited for interviews and presentations. This step allows the board to assess the firms' understanding of the company's industry, potential challenges, and their proposed audit approach.
Reference Checks:
Before finalizing the decision, the board conducts reference checks on the shortlisted audit firms. They seek feedback from other companies that have worked with the firms to gauge their reliability and professionalism.
Board Approval:
Based on the evaluations, interviews, and reference checks, the board selects a new auditor. The appointment is subject to shareholder approval in the upcoming annual general meeting.
Transition Planning:
The outgoing auditor (Auditor A) collaborates with the incoming auditor to ensure a smooth transition. They exchange relevant information, discuss audit methodologies, and address any potential challenges.
What is a crucial step in the process of appointing a new auditor in accounting?
Intermediate Accounting Volume 1
ISBN: 9781260306743
7th Edition
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod Dick