Problem

Predecessor and Prospective Auditors. The president of Allpurpose Loan Company had a genui...

Predecessor and Prospective Auditors. The president of Allpurpose Loan Company had a genuine dislike for external auditors. Almost any conflict generated a towering rage. Consequently, the company changed auditors often.

The firm of Wells & Ratley (W&R), CPAs, was recently hired to audit the 2014 financial statements. W&R succeeded the firm of Canby & Company (C&C), which had obtained the audit after Albrecht & Hubbard (A&H) had been fired. A&H audited the 2013 financial statements and rendered a report that contained an additional paragraph explaining an uncertainty about Allpurpose Loan Company’s loan loss reserve. Goodbye A&H! The president then hired C&C to audit the 2014 financial statements, and Chris Canby started the work, but before the audit could be completed, Canby was fired and W&R was hired to complete the audit. C&C did not issue an audit report because the audit was not finished.

Required:

Does the Wells & Ratley firm need to initiate communications with Canby & Company? With Albrecht & Hubbard? With both? Explain your response in terms of the purposes of communications between predecessor and successor auditors.

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