[Anonymous]

NINJA Question –

The following question seems a little confusing to me:

The procedure, “The entity’s successor accountant should communicate with the predecessor accountant to obtain access to the predecessor’s workpapers,” is:

A. required for both a review and compilation.

B. required for a compilation only.

C. not required for a compilation but required for a review.

D. not required for either a compilation or a review.

The correct answer is D. The answer I selected was C and it was wrong.

Okay- The question does not state whether the review is for an issuer or nonissuer. According to Becker, communication with the predecessor is required under SAS and PCAOB not required for SSARS. How do you tell from the wording of the question that it was intended for a review of non-issuers? Or is Becker information wrong???! Maybe it is accessing the “working papers” in question???! I’m confused at this time.

Please help! What are your thoughts?

Thank you!

[mpcammar]

Whether it is an issuer or not it does not matter in this case. A compilation definitely does not require communication with an previous auditor. A review is analytical procedures, inquiry, and observation. So, for either reviews or compilations it is just definition, but issuer vs non-issuer does not matter.

[Anonymous]

Hi!

Yeah, I agree that for compilation is not required communication with the predecessor.

But for a review the Becker book says it is required to communicate with the predecessor under SAS and PCAOB for issuers.

That's the reason I selected answer C.

Does that make sense?

[Mike J]

Neither a Compilation nor a Review requires any contact with the outside world. A review requires Analytical Procedures and Inquiry of MANAGEMENT (eg not outside counsel, another trap I fell into while practicing MCQs). A compilation requires even less work.

[Anonymous]

Yeah, I agree that for reviews the required inquires are only directed to members of management. Inquiries of client's lawyer are not generally required. However, the question i listed is in regards to communication with predecessor. My becker book says that for reviews communication with predecessors are required for issuers but not of nonissuers.

So, I think the answer could also be letter C because the question does not specifically say if its for issuers or nonissuers.

What are your thoughts?

I'm not sure if the CPA exam is that specific on this topic. But I made a 70 on last my audit attempt. 🙁

[Anonymous]

TXCPA2016,

Upon re-reading the question, it seems the question is only about obtaining the predecessor's working papers, which obviously isn't necessary for most engagements.

[Mike J]

@TXCPA2016. I disagree in that the predecessor auditor is an outside (likewise independent) party.

[Anonymous]

@Calvin- Yeah, that's what I thought too. That the working papers could be the determining factor. However, I the explanation that the MCQ gave me seemed to throw that theory away.

A successor accountant is not required to communicate with a predecessor accountant in connection with acceptance of a compilation or review engagement, but he or she may believe it is beneficial to obtain information that will assist in determining whether to accept the engagement.

@Mike- Yeah, I can see your point of view. Does the standard say not to communicate with outside parties for reviews?

[Anonymous]

Guys,

I think I might know the difference.

Do you think it is different for review engagements for PCAOB issuers for Interim FS?

I'm just trying to understand this becker book. lol

[Author]

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