Question

D. Jackson, CPA audited Washington Company's financial statements for the year ended December 31, 2007. On November 1, 2008, Washington notified Jackson that it was changing auditors and that Jackson's services were being terminated. On November 5, 2008, Washington invited Lincoln, CPA, to make a proposal for an engagement to audit its financial statements for the year ended December 31, 2008. What procedures concerning Jackson should Lincoln perform before accepting the engagement?

Answer 1

Audit is an independent examination of the financial statements of the company doen by the independent professionals approved by the goverment of the company, to ensure that figures specify in the books are reasonable.

The company have the right to appoint the new Auditor and to replace the old Auditor if they consider it is necessary to do so. It is the primary duty of the upcoming Auditor to accept the new Audit engagements after checking all the aspects. The upcoming Auditor should take NOC (No Objection Certificate) from the retiring Auditor. The New Auditor should find out the reason, why company changed the previous Auditor and is there is any problem in accepting the Audit engagement, Is there is any fraud element that company is trying to hide by changing the prvious auditor , or the Auditor is changed due to any clause of law etc.     

Before Accepting the Audit engagement of Whashington company, Lincoln is required to sent NOC to the previous Auditor, Mr. Jackson. If there is no negative response come from the Mr. Jackson and no objection raised by him, then Mr Jackson should find out the reson of change of Auditor. If everything look fine, and no problem is noticing in accepting engagement, then Mr. Lincon can accept the Audit engagement. But after accepting, any fact came in frount Mr. Lincon that creates big problem then Mr. Lincon should resign immediately.