new engagement requirements

[hrinkaa]

What should the auditor do when he replaces another auditor,

Another question is - how far should an auditor rely on the work of anothe auditor, whose report he uses. What needs to be done in case of differences of opinion in the approach to audit.

Should the statuatory auditor report that to the members?

hrinkaa

[Acid]

Hi,

I dont THINK that an auditor replaces another auditor! Its Shareholders or directors job to replace an auditor.

It may depend upn the scope of an audit which will determine the reliance of external auditor work over internal auditors reports.

[rajni]

i think you mean " what should the company do when he replaces the auditor"
am i right??

[hrinkaa]

I understand the reason why people fail in Audit is because they do not read the question. ok, maybe my q was not clear.


What should the auditor do when he replaces another auditor?

Is it not an accepted tradition that the incoming auditor should get in touch with the outgoing auditor before he accepts the new appointment. (at least about fees)

my 2nd question did not speak about internal external auditor at all.

What needs to be done in case of differences of opinion in the approach to audit. Should the statuatory auditor report that to the members?

How about Cost Auditors reports, where the Financial Auditor is not satisfied with dealing with items of cost (just as an example). He cannot change it, but he still can report on it. Can't he.

hrinkaa

[Vandana]

Hi Hrinkaa,

ok

1) There are no internationally accepted rules, but in general, prior to accepting the appointment, the potential auditor should ask if he can contact the old auditor. The client should give permission. If no, the auditor should consider declining the appointment as there already shows a lack of trust on the part of the client. If yes, the potential auditor should contact the old auditor and ask if there are any reasons why he should not accept the appointment. The old auditor should have the courtesy to respond (in real life many do not!!!). If not, then again the potential auditor will have to make a judgement as to whether to accept.

b) depends on what capactity each auditor is acting in. Can you be more specific?

c) again, it will depend in which country's laws are being followed. For example in some countries, the statutory auditor reports to the government. In others to the members. in some cases, the stat auidtor may only do a tax audit; in others a True and fair one.

Hope this helps!

[hrinkaa]

Hi Vandana,
Sorry if my opening line was quite blunt, i shall refrain from such opening lines

I agree with you in the first part (a). But the outgoing auditor may have some reservations and some reasons why he did not wish, (or was not) reappointed.

in relation to point (b) about differences in audit opinions - is it not common when discussions happen about reporting on items where multiple auditors report on True and Fair View.

point (c) - I personally handled a case where i had difference of opinion in certain costing aspects, but i was advised not to make any changes to the cost audit reports. My reporting partner said "We did not do the Audit, so we do not qualify it".

When we discussed with the Cost Audit team, they said "Company Policy is like that" - which we Financial Auditors did not agree with.

In such instances, what do we do. Thanks. hrinkaa

[Vandana]

Sorry if my opening line was quite blunt, i shall refrain from such opening lines

>> no worries! you can say what you like!!!

I agree with you in the first part (a). But the outgoing auditor may have some reservations and some reasons why he did not wish, (or was not) reappointed.

>> so either he tells the reasons or issues a statement which says there are no reasons which the new auditor should know about

in relation to point (b) about differences in audit opinions - is it not common when discussions happen about reporting on items where multiple auditors report on True and Fair View.

>> there should only ever be 1 auditor/audit company responsible for the T&F audit. Certainly it works this way in international audits. Otherwise it would be confusing. There is usually only 1 legally appointed auditor from shareholders meetings. There could be another auditor engaged to eg give assurance on the value of tangible assets in the BS. So this figure would be used for audit purposes. If the main auditor disagrees with the valuation, he would still qualify the financial statements, as the opinion in the FS is the main auditor's opinion.

point (c) - I personally handled a case where i had difference of opinion in certain costing aspects, but i was advised not to make any changes to the cost audit reports. My reporting partner said "We did not do the Audit, so we do not qualify it".

When we discussed with the Cost Audit team, they said "Company Policy is like that" - which we Financial Auditors did not agree with.

>> when we do a T&F audit, we are looking to see whether overall the FS give a T&F opinion. It is possible in the cost audit, they are looking at a level of detail that is too low for the main T&F audit. This could be the reason that the cost audit was not considered.

Hope this helps!

[hrinkaa]

Thanks Vandana,

I appreciate your reply.

Once again, i shall try and maintain the decorum for our forum

hrinkaa