The following questions pertain to client acceptance. Choose the best response.
a. When approached to perform an audit for the first time, the CPA (Chartered Professional Accountant) should make inquiries of the predecessor auditor. This is a necessary procedure because the predecessor may be able to provide the successor with information that will assist the successor in determining whether:
(1) The predecessor’s work should be used.
(2) The company follows the policy of rotating its auditors.
(3) In the predecessor’s opinion, internal control of the company has been satisfactory.
(4) The engagement should be accepted.
b. A successor would most likely make specific inquiries of the predecessor auditor regarding:
(1) Specialized accounting principles of the client’s industry.
(2) The competency of the client’s internal audit staff.
(3) The uncertainty inherent in applying sampling procedures.
(4) Disagreements with management as to auditing procedures.
c. Which of the following circumstances would most likely pose the greatest risk in accepting a new audit engagement?
(1) Staff will need to be rescheduled to cover this new client.
(2) There will be a client-imposed scope limitation.
(3) The firm will have to hire a specialist in one audit area.
(4) The client’s financial reporting system has been in place for 10 years.