For this question, I understand why the answer is A, but I don't understand the distinction made in the explanation made between “client records prepared by Spinner” and “audit documentation”. Aren't the client records prepared by Spinner part of the audit documentation? Thanks!
Spinner, CPA, had audited Lasco Corp.'s financial statements for the past several years. Prior to the current year's engagement, a disagreement arose that caused Lasco to change auditing firms. Lasco has demanded that Spinner provide Lasco with Spinner's audit documentation so that Lasco may show them to prospective auditors to help them prepare their bids for Lasco's audit engagement. Spinner refused and Lasco commenced litigation. Under the ethical standards of the profession, will Spinner be successful in refusing to turn over the documentation?
A. Yes, because Spinner is the owner of the audit documentation.
B. Yes, because Lasco is required to direct prospective auditors to contact Spinner to make arrangements to view the audit documentation in Spinner's office.
C. No, because Lasco has a legitimate business reason for demanding that Spinner surrender the audit documentation.
D. No, because it was Lasco's financial statements that were audited.
You Answered Correctly!
Spinner may, under proper circumstances, have to convey to Lasco (a) client‐provided records, (b) client records prepared by Spinner, and (c) supporting records. However, it should not have to convey its audit documentation, which it owns.
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