AU 315: Communications Between Predecessor and Successor Auditors
AU-C 510: Opening Balances—Initial Audit Engagements, Including Reaudit Engagements
AU-C 210: Terms of Engagement
AU EFFECTIVE DATE AND APPLICABILITY
| Original Pronouncement |
Statements on Auditing Standards (SASs) 84 and 93 |
| Effective Date |
All standards currently are effective. |
| Applicability |
Because of some complexities in applicability, additional explanation is provided below. |
AU-C EFFECTIVE DATE AND SUMMARY OF CHANGES
SAS No. 122, Codification of Auditing Standards and Procedures, is effective for audits of financial statements with periods ending on or after December 15, 2012.
AU-C Section 210 supersedes AU Section 315 paragraphs .03, .05–.10, and .14. The changes are primarily clarifying changes.
AU-C Section 510 .01–.02, .04, .11–.13, and .15–.23. AU-C Section 315:
- Makes clear that reviewing a predecessor auditor’s audit documentation cannot be the only procedure performed to obtain sufficient appropriate audit evidence regarding opening balances
- Clarifies that initial audit engagements include reaudits
- Includes an appendix: Illustrative Report with Disclaimer of Opinion, and
- Requires the auditor to obtain sufficient appropriate audit evidence about whether:
- Opening balances contain misstatements that materially affect the current period’s financial statements, and
- Accounting policies reflected in the opening balances have been consistently applied in the current period’s financial statements; and changes in the accounting policies have been properly accounted for, adequately presented, and disclosed in accordance with the applicable financial reporting framework
APPLICABILITY
This section applies when a change of auditors has occurred or is in process for an audit of financial statements in accordance with generally accepted auditing standards (GAAS). This section applies to both predecessor and successor auditors. It also provides guidance when a successor becomes aware of possible misstatements in financial statements reported on by a predecessor auditor.
The section applies whenever an auditor is considering accepting an engagement to audit or reaudit financial statements, and after such auditor has been appointed to perform such an engagement. The provisions are not required if the most recent audited financial statements are more than two years prior to the beginning of the earliest period to be audited by the successor auditor.
The section also applies to engagements when a successor auditor is replaced before completing an audit engagement and issuing a report. In such situations, there are two predecessor auditors: the auditor who reported on the most recent audited financial statements and the auditor who was engaged to perform but did not complete the engagement.
This section does not discuss quality control policies pertaining to client acceptance. One of the procedures for client acceptance required by Statement on Quality Control Standards (SQCS) 2, however, is communication with the predecessor auditor.
AU DEFINITIONS OF TERMS
Predecessor auditor. An auditor who (1) has reported on the most recent audited financial statements or was engaged to perform, but did not complete, an audit of the financial statements, and (2) has resigned, declined to stand for reappointment, or been notified that his or her services have been, or may be, terminated.
Successor auditor. An auditor who is considering accepting an engagement to audit financial statements but has not yet communicated with the predecessor auditor, and an auditor who has accepted such an engagement.
AU-C SECTION 510 DEFINITIONS OF TERMS
Source: AU-C Section 510.05
Initial audit engagement. An engagement in which either (1) the financial statements for the prior period were not audited, or (2) the financial statements for the prior period were audited by a predecessor auditor.
Opening balances. Those account balances that exist at the beginning of the period. Opening balances are based upon the closing balances of the prior period and reflect the effects of transactions and events of prior periods and accounting policies applied in the prior period. Opening balances also include matters requiring disclosure that existed at the beginning of the period, such as contingencies and commitments.
Predecessor auditor. The auditor from a different audit firm who has reported on the most recent audited financial statements or was engaged to perform but did not complete an audit of the financial statements.
Reaudit. An initial audit engagement to audit financial statements that have been previously audited by a predecessor auditor.
OBJECTIVES OF AU SECTION 315
The key topics addressed in SAS 84 are that it:
- Revises the definitions of predecessor and successor auditors to reflect the existing proposal environment.
- Expands the required communications with the predecessor auditor before the successor auditor accepts an engagement to include inquiries about communications made by the predecessor auditor to audit committees or others with equivalent authority and responsibility as described in Section 316, Consideration of Fraud in a Financial Statement Audit, Section 317, Illegal Acts by Clients, and Section 325, Communicating Internal Control Related Matters Identified in an Audit.
- Clarifies the successor auditor’s responsibility for obtaining evidence used in analyzing opening balances for the current-year financial statements and consistency of accounting principles.
- Expands the audit documentation ordinarily made available to the successor auditor by the predecessor auditor, to include documentation of planning, internal control, audit results, and other matters of continuing audit significance.
- Introduces an illustrative client consent and acknowledgment letter and an illustrative successor auditor acknowledgment letter (see Illustrations). A predecessor auditor may conclude that obtaining written communications from both the former client and the successor auditor will enable greater communication between both parties and greater access to the audit documentation than would be the case in the absence of such communications. The Auditing Standards Board (ASB) believes that it is in the public interest for successor auditors to have greater access to the audit documentation and, accordingly, for all auditors to have access to these letters and to use them in their practice. However, these letters are presented for illustrative purposes only and not required.
Any auditor who is engaged to perform an audit, but does not complete the audit, is considered a predecessor auditor.
OBJECTIVES OF AU-C SECTION 510
AU-C Section 510 states that:
. . . the objective of the auditor, in conducting an initial audit engagement, including a reaudit engagement, is to obtain sufficient appropriate audit evidence regarding opening balances about whether
a. opening balances contain misstatements that materially affect the current period’s financial statements and
b. appropriate accounting policies reflected in the opening balances have been consistently applied in the current period’s financial statements or changes thereto are appropriately accounted for and adequately presented and disclosed in accordance with the applicable financial reporting framework.
FUNDAMENTAL REQUIREMENTS
Change of Auditors
An auditor should not accept an engagement until the communications described in “Communications Before Acceptance” below have been evaluated. However, an auditor may make a proposal for an audit engagement before communicating with the predecessor auditor.
Other communications, described in “Other Communications” below, are advisable to assist in the planning of the engagement. However, the decision whether to make these other communications and the timing of them is more flexible (i.e., they may be initiated prior to engagement acceptance or subsequent thereto).
When more than one auditor is considering accepting an engagement, the predecessor auditor should not be expected to be available to respond to inquiries until a successor auditor has accepted the engagement subject to the evaluation of the “Communications Before Acceptance.”
Initiative for Communicating
The successor auditor should initiate the communication. The communication may be either written or oral. Both the predecessor and successor auditors should treat any information obtained from each other as confidential information.
Communications before Acceptance
Inquiry of the predecessor auditor is required because the predecessor may provide information that will assist the successor auditor in deciding whether to accept the engagement.
The successor auditor should request permission from the prospective client to make an inquiry of the predecessor prior to final acceptance of the engagement. The successor auditor should ask the prospective client to authorize the predecessor to respond fully to the successor auditor’s inquiries. If a prospective client refuses to permit the predecessor auditor to respond or limits the response, the successor auditor should inquire as to the reasons and consider the implications of that refusal in deciding whether to accept the engagement.
The successor auditor should make specific and reasonable inquiries of the predecessor about:
1. Information about management’s integrity
2. Disagreements with management about accounting principles, auditing procedures, or other similarly significant matters
3. Communications to audit committees or others with equivalent authority and responsibility regarding fraud (Section 316), illegal acts by clients (Section 317), and internal control–related matters (Section 325)
4. The predecessor auditor’s understanding concerning the reasons for the change of auditors
The predecessor auditor should respond promptly, fully, and factually. However, if the predecessor decides, due to unusual circumstances such as impending, threatened, or potential litigation; disciplinary proceedings; or other unusual circumstances, not to respond fully, he or she should indicate that the response is limited.
If the successor auditor receives a limited response, that auditor should consider the implications of the limited response in deciding whether to accept the engagement.
Other Communications
The successor auditor should ask that the client authorize the predecessor to allow a review of the predecessor auditor’s audit documentation. (Illustrations contains a client consent and acknowledgment letter that may be used by the predecessor auditor.) Before permitting access to the audit documentation, the predecessor auditor may obtain a written communication from the successor auditor about the use of the audit documentation. (Illustrations contains a successor auditor acknowledgment letter.)
The predecessor auditor should:
1. Determine the audit documentation to be made available for review and whether the documentation may be copied
2. Ordinarily allow the successor auditor to review audit documentation, including documentation of planning, internal control, audit results, and other matters of continuing accounting and auditing significance, such as the documented analysis of balance sheet accounts, and documentation relating to contingencies
3. Reach an understanding with the successor auditor about the use of the audit documentation (the extent, if any, to which a predecessor auditor allows access to the audit documentation is a matter of professional judgment)
Successor Auditor’s Use of Communications
The successor auditor should obtain sufficient competent evidence to afford a basis for expressing an opinion. For the successor auditor, the communication with his or her predecessor will provide evidence about:
- The impact of the opening balances on the current year financial statements
- The consistency of accounting principles
- The risk of material misstatement (that is, the communication may be considered a risk assessment procedure.)
Determining the relevance and reliability of this evidence is a matter of professional judgment. Audit evidence may include:
1. The most recent audited financial statements
2. The predecessor auditor’s report
3. The results of inquiries of the predecessor auditor
4. The results of the successor auditor’s review of the predecessor’s audit documentation for to the most recently completed audit
5. Audit procedures performed on the current period’s transactions
The successor auditor may wish to make inquiries about the professional reputation and standing of the predecessor auditor (Section 543, Part of Audit Performed by Other Independent Auditors).
In reporting on the audit, the successor auditor should not refer to the report or work of the predecessor auditor in his or her audit report to support the successor auditor’s opinion.
Audits of Financial Statements That Have Been Previously Audited
If an auditor is asked to audit financial statements that have been previously audited (i.e., a reaudit), the auditor considering whether to accept the reaudit engagement is also a successor auditor, and the auditor who previously reported is also a predecessor auditor.
In addition to the communications described in “Communications before Acceptance” above, the auditor should state that the purpose of the inquiries is to obtain information about whether to accept an engagement to reaudit the financial statements. If the successor auditor accepts the reaudit engagement, he or she may consider the information obtained from inquiries of the predecessor auditor and review of the predecessor auditor’s report and audit documentation for the purpose of planning the reaudit. However, the information obtained from those inquiries and any review of the predecessor auditor’s report and audit documentation is not a sufficient basis for issuing an opinion.
The successor auditor should plan and perform the reaudit in accordance with GAAS, but should not assume responsibility for the predecessor auditor’s work or issue a report that reflects divided responsibility. The predecessor auditor is not considered a specialist (Section 336) or an internal auditor (Section 322).
If, in a reaudit engagement, the successor auditor cannot obtain sufficient competent evidential matter to express an opinion on the financial statements, the successor auditor’s opinion should be qualified or the successor should disclaim an opinion because of the inability to perform necessary procedures.
The successor auditor should ask for audit documentation for the period or periods under reaudit and the period prior to the reaudit period. However, the extent of access to the audit documentation is a matter of the predecessor auditor’s judgment.
When performing the reaudit, the successor auditor should, when inventory is material, observe or perform some physical counts of inventory at a date after the reaudit period, in connection with a current audit or otherwise, and apply appropriate tests of intervening transactions.
Discovery of Possible Misstatements in Financial Statements Reported on by a Predecessor
During the audit or reaudit, the successor auditor may become aware of information that may indicate that financial statements reported on by the predecessor auditor require revision. In this situation, the successor auditor should ask that the client inform the predecessor auditor and arrange for the three parties to discuss this information and try to resolve the matter.
The successor auditor should communicate to the predecessor auditor any information discussed in Section 561, Subsequent Discovery of Facts Existing at the Date of the Auditor’s Report, that the predecessor may need to consider.
If the client will not inform the predecessor auditor or if the successor auditor is not satisfied with the way that the matter is resolved, the successor auditor should consider (1) any potential implications on the current engagement, (2) whether to resign from the engagement, and (3) whether consultation with legal counsel about further action is appropriate.
INTERPRETATIONS
There are no interpretations for this section.
PROFESSIONAL ISSUES TASK FORCE PRACTICE ALERTS
97-3 Changes in Auditors and Related Topics
This Practice Alert provides guidance to successor auditors when there has been a change of auditors. The alert clarifies the successor auditor’s responsibility for:
- Requesting that the client authorize a review of the predecessor auditor’s audit documentation.
- Analyzing opening balances on the current year financial statements and for evaluating the consistency of accounting principles.
If the successor auditor is not allowed access to the predecessor auditor’s audit documentation, the successor auditor should use professional judgment in determining the nature, timing, and extent of procedures to be performed on opening balances, including determining the need to audit the previous financial statements.
The practice alert also gives guidance on requests to reissue reports. Guidance on reissuing reports is discussed in Section 508.
TECHNIQUES FOR APPLICATION
Revisions of Financial Statements Reported on by the Predecessor Auditor
It is possible that during the audit the successor auditor will become aware of information that leads him or her to believe that financial statements reported on by the predecessor may require revision. The successor should prepare a worksheet with appropriate supporting documentation and should request the client to arrange a meeting between the predecessor, the successor, and the client.
NOTE: If the client refuses, or if the successor is not satisfied with the results of the conference, the successor should consult his or her attorney.
At the meeting, the predecessor auditor is advised to do the following:
1. Review the worksheet and supporting documentation of the successor auditor
2. Determine whether the report should be revised
If the predecessor auditor determines that the report should be revised, the guidance provided in Section 561, Subsequent Discovery of Facts Existing at the Date of the Auditor’s Report, may be pertinent.
Reissuance of Predecessor’s Report
Generally, business enterprises present their financial statements for the current and preceding years. For example, the SEC requires presentation of the two most recent annual balance sheets and the three most recent statements of income and cash flows. In these situations, the successor auditor may do the following:
1. Refer to the predecessor’s previously issued report in his or her report, but only as it relates to the financial statements of the prior year on which the predecessor reported
2. Request that the client ask the predecessor auditor to reissue the previously issued report
Guidance and illustrations on reference to, and reissuance of, the predecessor’s previously issued report are provided in Section 508.
AU ILLUSTRATIONS
Following are illustrations of (1) client consent and acknowledgment, and (2) a successor auditor acknowledgment letter. (The equivalent AU-C 510 illustrations and the illustrative Report with Disclaimer of Opinion follow these two AU 315 illustrations.)
Illustration 1. Illustrative Client Consent and Acknowledgment Letter
The predecessor auditor may request a consent and acknowledgment letter from the client to reduce misunderstandings about the scope of the communications being authorized. The following letter is presented for illustrative purposes only and is not required by professional standards.
June 30, 20X6
Widget Enterprises
Anytown, NY
You have given your consent to allow Smith & Jones, LLP, as successor independent auditors for Widget Enterprises (Widget), access to our audit documentation for our audit of the December 31, 20X5 financial statements of Widget. You also have given your consent to us to respond fully to Smith & Jones, LLP inquiries. You understand and agree that the review of our audit documentation is undertaken solely for the purpose of obtaining an understanding about Widget and certain information about our audit to assist Smith & Jones, LLP in planning the audit of the December 31, 20X6 financial statements of Widget.
Please confirm your agreement with the foregoing by signing and dating a copy of this letter and returning it to us.
Attached is the form of the letter we will furnish Smith & Jones, LLP regarding the use of the audit documentation.
Very truly yours,
Hemingway & Masterson, LLC
By: _______________________
Accepted:
Widget Enterprises
By: _______________________ Date: _______________________
Illustration 2. Illustrative Successor Auditor Acknowledgment Letter
The following letter is presented for illustrative purposes only and is not required by professional standards.
August 30, 20X6
Smith & Jones, LLP
Anytown, NY
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the December 31, 20X5 financial statements of Widget Enterprises (Widget). We rendered a report on those financial statements and have not performed any audit procedures subsequent to the audit report date. In connection with your audit of Widget’s 20X6 financial statements, you have requested access to our audit documentation prepared in connection with that audit. Widget has authorized our firm to allow you to review that audit documentation.
Our audit, and the audit documentation prepared in connection therewith, of Widget’s financial statements was not planned or conducted in contemplation of your review. Therefore, items of possible interest to you may not have been specifically addressed. Our use of professional judgment and the assessment of audit risk and materiality for the purpose of our audit means that matters may have existed that would have been assessed differently by you. We make no representation as to the sufficiency or appropriateness of the information in our audit documentation for your purposes.
We understand that the purpose of your review is to obtain information about Widget and our 20X5 audit results to assist you in planning your 20X6 audit of Widget. For that purpose only, we will provide you access to our audit documentation that relates to that objective.
Upon request, we will provide copies of that audit documentation that provide factual information about Widget. You agree to subject any such copies or information otherwise derived from our audit documentation to your normal policy for retention of audit documentation and protection of confidential client information. Furthermore, in the event of a third-party request for access to our audit documentation prepared in connection with your audits of Widget, you agree to obtain our permission before voluntarily allowing any such access to our audit documentation or information otherwise derived from our audit documentation, and to obtain on our behalf any releases that you obtain from such third party. You agree to advise us promptly and provide us a copy of any subpoena, summons, or other court order for access to your audit documentation that include copies of our audit documentation or information otherwise derived therefrom.
Because your review of our audit documentation is undertaken solely for the purpose described above and may not entail a review of all our audit documentation, you agree that (1) the information obtained from the review will not be used by you for any other purpose, (2) you will not comment, orally or in writing, to anyone as a result of that review as to whether our audit was performed in accordance with auditing standards generally accepted in the United States of America, (3) you will not provide expert testimony or litigation services or otherwise accept an engagement to comment on issues relating to the quality of our audits, and (4) you will not use the audit procedures or results thereof documented in our audit documentation as evidential matter in rendering your opinion on the 20X6 financial statements of Widget, except as contemplated in Statement on Auditing Standards 84.
Please confirm your agreement with the foregoing by signing and dating a copy of this letter and returning it to us.
Very truly yours,
Hemingway and Masterson, LLC
By: _______________________
Accepted:
Smith & Jones, LLP
By: _______________________ Date: _______________________
AU-C 510 ILLUSTRATIONS
Illustration 1. Report with Disclaimer of Opinion On Results of Operations and Cash Flows and Unmodified Opinion On Financial Position
Circumstances include the following:
- The auditor did not observe the counting of the physical inventory at the beginning of the current period and was unable to obtain sufficient appropriate audit evidence regarding the opening balances of inventory.
- The possible effects of the inability to obtain sufficient appropriate audit evidence regarding opening balances of inventory are deemed to be material and pervasive to the entity’s results of operations and cash flows.
- The financial position at year-end is fairly presented.
- A disclaimer of opinion regarding the results of operations and cash flows and an unmodified opinion regarding financial position are considered appropriate in the circumstances.
Independent Auditor’s Report
[Appropriate Addressee]
Report on the Financial Statements
We have audited the accompanying balance sheet of ABC Company as of December 31, 20X1, and were engaged to audit the related statements of income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on conducting the audit in accordance with auditing standards generally accepted in the United States of America. Because of the matters described in the Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the income statement and the cash flow statement.
We conducted our audit of the balance sheet in accordance with auditing standards generally accepted in the United State s of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our unmodified opinion on the financial position.
Basis for Disclaimer of Opinion on the Results of Operations and Cash Flows
We were not engaged as auditors of the Company until after December 31, 20X0, and, therefore, did not observe the counting of physical inventories at the beginning of the year. We were unable to satisfy ourselves by performing other auditing procedures concerning the inventory held at December 31, 20X0. Since opening inventories enter into the determination of net income and cash flows, we were unable to determine whether any adjustments might have been necessary in respect of the profit for the year reported in the income statement and the net cash flows from operating activities reported in the cash flow statement.
Disclaimer of Opinion on the Results of Operations and Cash Flows
Because of the significance of the matter described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the results of operations and cash flows for the year ended December 31, 20X1. Accordingly, we do not express an opinion on the results of operations and cash flows for the year ended December 31, 20X1.
Opinion on the Financial Position
In our opinion, the balance sheet presents fairly, in all material respects, the financial position of ABC Company as of December 31, 20X1, in accordance with accounting principles generally accepted in the United States of America.
Report on Other Legal and Regulatory Requirements
[Form and content of this section of the auditor’s report will vary depending on the nature of the auditor’s other reporting responsibilities.]
[Auditor’s signature]
[Auditor’s city and state]
[Date of the auditor’s report]
Illustration 2. Entity Consent and Acknowledgment Letter
Paragraph .07 requires that the auditor request management to authorize the predecessor auditor to allow a review of the predecessor auditor’s audit documentation and for the predecessor auditor to respond fully to inquiries by the auditor, thereby providing the auditor with information to assist in planning and performing the engagement. Paragraph .A4 states that the predecessor auditor may request a consent and acknowledgment letter from the entity to document this authorization in an effort to reduce misunderstandings about the scope of the communications being authorized. The following letter is presented for illustrative purposes only and is not required by professional standards.
[Date]
ABC Enterprises
[Address]
You have given your consent to allow [name of successor CPA firm], as independent auditors for ABC Enterprises (ABC), access to our audit documentation for our audit of the December 31, 20X1 financial statements of ABC. You also have given your consent to us to respond fully to [name of successor CPA firm] inquiries. You understand and agree that the review of our audit documentation is undertaken solely for the purpose of obtaining an understanding about ABC and certain information about our audit to assist [name of successor CPA firm] in planning and performing the audit of the December 31, 20X2 financial statements of ABC.
Please confirm your agreement with the foregoing by signing and dating a copy of this letter and returning it to us.
Attached is the form of the letter we will furnish [name of successor CPA firm] regarding the use of the audit documentation.
Very truly yours,
[Predecessor Auditor]
By: ___________________________
Accepted:
ABC Enterprises
By: ___________________________
Date: _________________
Illustration 3. Illustrative Successor Auditor Acknowledgment Letter
Paragraph .A6 states that the predecessor auditor may request that the auditor confirm in writing his or her agreement regarding the use of the predecessor auditor’s audit documentation before permitting access to it. The following letter is presented for illustrative purposes only and is not required by professional standards.
[Date]
[Successor Auditor]
[Address]
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the December 31, 20X1 financial statements of ABC Enterprises (ABC). We rendered a report on those financial statements and have not performed any audit procedures subsequent to the audit report date. In connection with your audit of ABC’s 20X2 financial statements, you have requested access to our audit documentation prepared in connection with that audit. ABC has authorized our firm to allow you to review that audit documentation.
Our audit, and the audit documentation prepared in connection therewith, of ABC’s financial statements were not planned or conducted in contemplation of your review. Therefore, items of possible interest to you may not have been specifically addressed. Our use of professional judgment and the assessment of audit risk and materiality for the purpose of our audit mean that matters may have existed that would have been assessed differently by you. We make no representation about the sufficiency or appropriateness of the information in our audit documentation for your purposes.
We understand that the purpose of your review is to obtain information about ABC and our 20X1 audit results to assist you in planning and performing your 20X2 audit of ABC. For that purpose only, we will provide you access to our audit documentation that relates to that objective.
Upon request, we will provide copies of audit documentation that provides factual information about ABC. You agree to subject any such copies or information otherwise derived from our audit documentation to your normal policy for retention of audit documentation and protection of confidential entity information. Furthermore, in the event of a third-party request for access to your audit documentation prepared in connection with your audits of ABC, you agree to obtain our permission before voluntarily allowing any such access to our audit documentation or information otherwise derived from our audit documentation, and to obtain on our behalf any releases that you obtain from such third party. You agree to advise us promptly and provide us a copy of any subpoena, summons, or other court order for access to your audit documentation that include copies of our audit documentation or information otherwise derived therefrom.
Please confirm your agreement with the foregoing by signing and dating a copy of this letter and returning it to us.
Very truly yours,
[Predecessor Auditor]
By: ___________________________
Accepted:
[Successor Auditor]
By: ___________________________
Date: __________________
Even with management’s consent, access to the predecessor auditor’s audit documentation may still be limited. Experience has shown that the predecessor auditor may be willing to grant broader access if given additional assurance concerning the use of the audit documentation. Accordingly, the auditor might consider agreeing to the following additional limitations on the review of the predecessor auditor’s audit documentation in order to obtain broader access:
- The auditor will not comment, orally or in writing, to anyone as a result of the review about whether the predecessor auditor’s engagement was performed in accordance with generally accepted auditing standards.
- The auditor will not provide expert testimony or litigation support services or otherwise accept an engagement to comment on issues relating to the quality of the predecessor auditor’s audit.
- The auditor accepts sole responsibility for the nature, timing, and extent of audit work performed and the conclusions reached in expressing an opinion on the 20X2 financial statements of ABC.
The following paragraph illustrates the previous text:
Because your review of our audit documentation is undertaken solely for the purpose described previously and may not entail a review of all our audit documentation, you agree that (1) the information obtained from the review will not be used by you for any other purpose, (2) you will not comment, orally or in writing, to anyone as a result of that review about whether our audit was performed in accordance with generally accepted auditing standards, (3) you will not provide expert testimony or litigation support services or otherwise accept an engagement to comment on issues relating to the quality of our audit, and (4) you accept sole responsibility for the nature, timing and extent of audit work performed and the conclusions reached in expressing your opinion on the 20X2 financial statements of ABC.
