Assume you are an audit partner for SENA international auditing firm. The audit committee of ABC manufacturing company contacted you in order to provide financial statements audit for ABC company. As an audit partner, you are discussing with the management and with audit team the significance of contacting the prior auditor and asked for permission to do so. The management of ABC company agreed that you contact the prior auditor to make inquiries and gather additional information. After contacting the prior auditor, SENA audit firm has prepared an engagement letter and sent it to the audit committee of SENA corporation.

Instructions:

1. Explain the characteristics and role of the audit committee in financial statements audit. Discuss and provide you opinion.

2. Do you think that audit committee plays a role in detecting and preventing fraud? Discuss.

3. What is the benefit of contacting the predecessor auditor? What is your opinion on this issue?

4. Explain other important information that are generally included in the engagement letter.