Question

A CPA, is requested to prepare a written report on the application of the requirements of an applicable financial reporting framework to a specific transaction by an entity that is audited by another CPA. Should they accept the engagement? If so, must he consult with the continuing CPA?

Answer 1

For answering this question we should know the meaning of the following terms:

Continuing accountant. An accountant who has been engaged to report on the financial statements of a specific entity.

Hypothetical transaction. A transaction or financial reporting issue that does not involve facts or circumstances of a specific entity.

Reporting accountant. An accountant, other than a continuing accountant, in public practice, who prepares a written report or provides oral advice on the application of the requirements of an applicable financial reporting framework to a specific transaction .

Specific transaction. A completed or proposed transaction or group of related transactions or a financial reporting issue involving facts and circumstances of a specific entity.

Now In determining whether to accept the engagement, the reporting accountant should consider
a. the circumstances under which the written report or oral advice is requested,
b. the purpose of the request, and
c. the intended use of the written report or oral advice.

The reporting accountant should accept an engagement to issue a written report on the application of the requirements of an applicable financial reporting framework to a specific transaction only when the transaction involves facts or circumstances of a specific entity. The reporting accountant should not accept an engagement to issue a written report on hypothetical transactions.
SO IN THIS CASE HE SHOULD ACCEPT THE ENGAGEMENT ONLY IF THE TRANSACTION INVOLVES FACTS OR CIRCUMSTANCES OF A SPECIFIC ENTITY.

Consulting With the Continuing Accountant

The reporting accountant should consult with the continuing accountant to determine whether the reporting accountant has obtained the available facts relevant to form a conclusion, unless
a. the reporting accountant is engaged to issue a written report or provide oral advice on the application of the requirements of an applicable financial reporting framework to a specific transaction,

b. the reporting accountant is engaged to provide recurring accounting and reporting advice and
i. does not believe that a second opinion is being requested,
ii. has full access to management, and
iii. believes that the relevant information has been obtained in order to issue a written report or provide oral advice regarding the application of the requirements of an applicable financial reporting framework to an entity's specific transaction.
If the reporting accountant determines in accordance with the preceding a–b that it is not necessary to consult with the continuing accountant, the reporting accountant should document the rationale for not consulting.

ACCORDINDG TO ABOVE PROVISION REPORTING ACCOUNTANT IS NOT REQUIRED TO CONSULT WITH THE CONTINUING CPA.