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BACKGROUND:

Audit standards require that successor auditors communicate with predecessor auditors prior to accepting an engagement. Predecessor auditors, however, cannot share confidential client information without the permission of the client. Once permission is granted, communication can begin and includes conversations about the client to help the successor auditor determine if client acceptance appears appropriate. For example, conversations will include discussion about management integrity, any disagreements with management, communication with those charged with governance, and the reason for the auditor change.

Smith Jones CPA was the predecessor auditor for Awesome Adventures, Inc. Jones was told that the firm was terminated and Awesome Adventures was to retain Rich Fortune CPA. Rich Fortune contacted Smith Jones in order to have a predecessor-successor conversation. Smith Jones indicated that Awesome Adventures was a long time client of the firm and that the dispute which led to the termination of its services significantly revolved around audit fees. Jones indicated that management put unusual time deadlines on the CPAs, and they sometimes felt rushed to complete the audit.

Rich Fortune appears to have asked Smith Jones about management integrity, disagreements with management, and the reason for the auditor change. What did Rich Fortune fail to ask Smith Jones?

What step did Rich Fortune fail to perform?

What should Rich Fortune do with the information about the unnecessary time pressure?

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