[Anonymous]

Which of the following factors most likely would cause a CPA not to accept a new audit engagement?

a.

The indications that management has not investigated employees in key positions before hiring them.

b.

The CPA’s lack of understanding of the prospective client’s operations and industry.

c.

The inability to review the predecessor auditor’s working papers.

d.

The prospective client’s unwillingness to permit inquiry of its legal counsel.

I think the answer is A because management lacks integrity.

Becker say D. I say D is wrong because inquiry of legal counsel is performed after acceptance. You can withdraw from engagement but that’s not the same as acceptance. Who agree’s?

[Anonymous]

I see where your coming from and I would've picked A as well. But those are indications and I don't think it necessarily means management is being unethical or lacking integrity because they failed to investigate key employees. This could be a weakness in internal control. However, if before accepting an engagement you already know that the client is unwilling to permit you to communicate with their legal counsel. Then what's the point of accepting the engagement in the first place? Refusal to permit inquiry will result in a disclaimer or withdrawal from the audit. (reference: A4-57)

[acamp]

A. You might question their competence.

D. Suggests they might be HIDING a problematic issue.

Potentially hiding something is worse than poor controls/insight. And inquiry of legal, bankers, etc, is a common client acceptance practice.

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[pfitz092]

I agree with the above two posts. If (prior to acceptance) management has already made it clear that they will not permit lawyer inquiry, you would never accept the engagement. This is much more indicative of lack of integrity (or concealment of a bigger issue) than simply having lackluster hiring practices.

[Anonymous]

The two big reasons for not accepting an engagement are:

1.) Auditor has reason to believe management lacks integrity

2.) Scope limitation imposed by management

“A” is incorrect because a weak or failed control simply means the auditor will need to do more audit work to gain reasonable assurance that the financial statements are free from material misstatement.

“D” is correct because it is a scope limitation that exists as a precondition of the engagement that would preclude the auditor from accepting.

[Author]

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