What responsibilities does the predecessor auditor have if any regarding the successor auditors inquiries according to the Auditing standards?

SAS No. 17 Communication between Successor and Predecessor Auditors

Status

Issued by Auditing Standards Committee in Taiwan on 1 May, 1989.

Summary

The initiative for communicating rests with the successor auditor. The communication may be either written or oral. Both the predecessor and successor auditors should hold in confidence information obtained from each other. This obligation applies whether or not the successor auditor accepts the engagement.

The successor auditor should request permission from the prospective client to make an inquiry of the predecessor auditor prior to final acceptance of the engagement. The successor auditor should ask the prospective client to authorize the predecessor auditor 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 auditor regarding matters that will assist the successor auditor in determining whether to accept the engagement. Matters subject to inquiry should include—

• Information that might bear on the integrity of management.
• Disagreements with management as to accounting principles, auditing procedures, or other similarly significant matters.
• The predecessor auditor's understanding as to the reasons for the change of auditors.

The predecessor auditor should respond promptly and fully, on the basis of known facts, to the successor auditor's reasonable inquiries. However, should the predecessor auditor decide, due to unusual circumstances such as impending, threatened, or potential litigation; disciplinary proceedings; or other unusual circumstances, not to respond fully to the inquiries, the predecessor auditor should clearly state that the response is limited. If the successor auditor receives a limited response, its implications should be considered in deciding whether to accept the engagement.

The successor auditor should request that the client authorize the predecessor auditor to allow a review of the predecessor auditor's working papers. The predecessor auditor should determine which working papers are to be made available for review and which may be copied, such as the working paper analysis of balance sheet accounts, and those relating to contingencies.

Effective date

This Statement is effective for audit of financial statements where the successor auditor is engaged on or after 1 July, 1989.

What is a Predecessor Auditor?

A predecessor auditor is an auditor who conducted the audit for a client in prior periods, but who no longer does so. This situation arises in any of the following circumstances:

• The client has notified the auditor that his or her contract will not be renewed for future audits.

• The auditor has resigned from the engagement.

• The auditor has declined to return for the next audit.

• The auditor did not complete the prior audit engagement.

When a successor auditor is appointed to an audit engagement, the successor may need to communicate with the predecessor auditor regarding various issues that are then incorporated into the successor's audit. If so, the successor auditor will need the client’s permission to discuss matters with the predecessor auditor.

Related Courses

How to Conduct a Compilation Engagement

How to Conduct a Review Engagement

How to Conduct an Audit Engagement

What are the responsibilities of the successor and predecessor auditor when a company is changing auditors?

What is the responsibility of a successor auditor with respect to communicating with the predecessor auditor in connection with a prospective new audit client?

What is a potential successor auditor's responsibility for communicating with the predecessor auditors?

What information should a successor auditor obtain during the inquiry of the predecessor auditor prior to acceptance of the audit?