Question

1. The auditing firm Kevin & Steve withdrew from an engagement due to the discovery of fraud on a nonissuer client’s tax return. When the successor auditor asks why the firm withdrew from the engagement, Kevin & Steve should

a. Obtain permission from the client to disclose the reason.

b. Disclose the reason for the withdrawal because nondisclosure would not serve the public interest.

c. Not disclose any information to the successor auditor.

d. Disclose the information because the inquiry is an exception to the Confidential Client Information Rule.

Answer 1

When a auditing firm withdraws from an engagement due to discovery of fraud it is the duty of the previous auditor to disclose the reason and the facts to the successor auditor of withdrawing the the engagement because this enquiry is an exception to the confidential client information rule. The rule says you can't disclose any of the clients information even after you no longer serve the client but it is your duty to disclose the reason to the successor auditor if you withdraw from any of the of your client. Also this is is within the public interest Hence option B is not correct

Hence the correct answer is D

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