hich of the following are true statements regarding client acceptance and continuance? A. If any threats...

hich of the following are true statements regarding client acceptance and continuance?

A. If any threats to independence are identified, that auditor should not accept the engagement.

B. An engagement letter should be issued every year.

C. The auditor only needs to assess independence for new engagements.

D. The independence requirement is met if the auditor does not own shares of the client.

E. Once the client signs the engagement letter, the client cannot sue the auditor.

F. If the client does not allow the new auditor to contact the predecessor auditor, it should not impact client acceptance.

Solutions

Expert Solution

The following statements are true:-

A (in line with the professional standards on auditing and the ethics)

The following statements are NOT true:-

B (this is optional and auditor may send engagement letter keeping in view various factors.)

C (Auditor needs to be independent at all times and not only at the initial acceptance of the assurance engagement.)

D (Independence is a very subjective term and cannot just be measures by auditor not holding shares of client. Auditor's relatives should also not hold shares and various other conditions of independence must be satisfied)

E (Engagement letter does not absolve the auditor from his responsibilities and Auditor can be sued and remains liable for negligence even if the client has signed the engagement letter.

F (Not allowing to contact the predecessor auditor will affect the compliance of professional standards on auditing which require communication with the predecessor auditor and also raises doubt over the clients intention and increases professional scepticism)

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