Chapter 11, Problem 19.9EP

Dan Cole is the head of the county’s Division of Animal Control. The division receives funding from both the state and federal governments and is required to have its audit under GAGAS. You and Dan were fraternity brothers at All State University, and your families often celebrate holidays and special occasions together. Dan has asked your audit firm to perform the division’s financial audit this year. What should you do?

1. a.      Contact the state board of accountancy for authorization to accept the audit.
2. b.      Decline the audit because you want to avoid any perceived independence issues.
3. c.       Accept the audit but disclose your relationship in the engagement letter and audit report.
4. d.      Refer to the ethics and independence guidance in GAGAS before making a decision to accept the engagement.