ZZZZ Best Case Assignment #2
Question 1: 15 points
AU Section 315 Communications Between Predecessor and Successor Auditors .01-.13Using the facts from the ZZZZ Best case and professional guidance from AU Section 315, explain the following:
A. As the successor auditor, what was E&W supposed to do before they accepted ZZZZ Best as an audit client in regards to Greenspan? Summarize in enough detail AU 315.03-.06. In your answer give and support your opinion as to whether or not E&W violated these paragraphs and if you can prove it as a fact.
The first thing E&W should have done, as the successor auditor, was to postpone accepting the engagement until the communications in paragraphs .07 through .10 have been evaluated. (AU…show more content… There is no record that ZZZZ Best management forced Greenspan to sign a confidentiality agreement, so this would not be a factor in E&W’s ultimate decision to work with ZZZZ Best.
AU 315 .09 specifies the type of information inquiries that a successor auditor would make to a predecessor auditor. This type of information would help the successor auditor access the overall integrity of the potential client. Referring to the ZZZZ Best Case, there was no information that E&W could have gathered from Greenspan that would have shown a negative light on the integrity of ZZZZ Best Management. Overall, it is clear from reading the case that E&W did not put much emphasis on gathering information from Greenspan since, at that particular time, the company had a good reputation. Greenspan had been deceived by his former client, so the potential information would have been highly unreliable.
C. As the predecessor auditor to Price Waterhouse, did E&W follow the professional standards in paragraphs .03-.10 in their communications with Price Waterhouse? In your answer using guidance and details from the case, explain what E&W was supposed to do and what they did do (did they follow the standard or violate a part of the standard guidance? If so, then which part?). Especially address under what circumstances is a predecessor auditor