[jombe]

“prospective client is not willing to allow an auditor to send lawyer inquiry letter.”

Can auditor accept engagement?

I am watching an online lecture & my teacher is on vacation. 🙁

He says “no” in the video due to scope limitation, but I can’t find more info on this.

Only thing I did find was the auditor should consider severity of the matter & issue either qualified or disclaimer, but this is after accepting engagement…

Please help me if you can… thanks!!!

FAR - 94 (10/4/15), Local Prep Online Lectures, BISK & NINJA MCQ
AUD - 99 (1/19/16), Local Prep Online Lectures, BISK & NINJA MCQ
REG - 96 (4/19/16), Local Prep Online Lectures, BISK & NINJA MCQ
BEC - 91 (7/19/16), Local Prep Online Lectures, BISK & NINJA MCQ

581 days of listening to lectures, reading texts & 10,000+ MCQs...

[OlintoJr]

Not really sure what you're looking for… But think about it this way… If the client refused to give the auditor the right to send confirm letters to the bank, should the auditor accept the engagement? Of course not. How can an auditor opine on something (cash balance in bank account in my example) without verifying with the third parties? Same thing with the lawyers. Why would an auditor send inquiry letters? To verify if there are any outstanding claims/litigations that are unaccounted for in the financials/notes. How can an auditor provide reasonable assurance to provide an opinion without obtaining this information? They can't. Therefore they should not accept the engagements.

Hope that helped

FAR - 11/30/14 -79
AUD - 2/19/15 -86
BEC - 4/09/15 -86
REG - 11/30/15 -87

I'M DONE! ITS OVER! WOOOOOOO!!!!!!!

[NebCPA]

The answer to your question will depend on when the auditor wants to send the lawyer inquiry letter.

AU-210 is the standard that governs engagement acceptance. It states that if management imposes a scope limitation on the auditor’s work in the terms of the proposed audit, such that the auditor believes the limitation will result in the auditor disclaiming an opinion of the financial statements as a whole, the auditor should not accept such the engagement.

Since it is a prospective client, if the auditor wants to send an inquiry letter to the lawyer before accepting the engagement, not as an audit procedure but as a pre-engagement, risk assessment, accepting the engagement is allowed by the standards. The auditor must evaluate the risk of accepting each engagement, but is not required to inquire prior to accepting any engagement with any legal counsel.

However, if management is stating that the auditor cannot inquire with their legal counsel as an audit procedure, then the firm should not accept the engagement because the scope limitation would cause the auditors to issue a disclaimer of opinion, and as stated above, an auditor cannot accept an engagement where they know they will issue a disclaimer of opinion.

[jombe]

thank you you two! I think i was just overthinking it.. thanks! 🙂

FAR - 94 (10/4/15), Local Prep Online Lectures, BISK & NINJA MCQ
AUD - 99 (1/19/16), Local Prep Online Lectures, BISK & NINJA MCQ
REG - 96 (4/19/16), Local Prep Online Lectures, BISK & NINJA MCQ
BEC - 91 (7/19/16), Local Prep Online Lectures, BISK & NINJA MCQ

581 days of listening to lectures, reading texts & 10,000+ MCQs...

[Author]

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