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Clarified Auditing Standards: Opening Balances (AU-C Section 510) – Part 3

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Jul 30th 2015
CPA Firm Support Services, LLC
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This article contains illustrative correspondence between the successor auditor and the reporting entity, and illustrative correspondence between the successor auditor and the predecessor auditor. The letters are patterned after exhibits B and C in AU-C Section 510.

The exhibits in the standards should be read in their entirety to guide the design of appropriate correspondence in specific engagement circumstances.

Exhibit B: Illustrative Entity Consent and Acknowledgment Letter (Ref: par. .07 and .A4 AU-C 510)
Paragraph .07 requires that the auditor request management to authorize the predecessor auditor to allow a review of the predecessor auditor's audit documentation. It also allows for the predecessor auditor to respond fully to inquiries by the auditor, thereby providing the auditor with information to assist in planning and performing the engagement.

Paragraph .A4 states that the predecessor auditor may request a consent and acknowledgment letter from the entity to document this authorization, in an effort to reduce misunderstandings about the scope of the communications being authorized.

The following letter is presented for illustrative purposes only and is not required by professional standards.

January 15, 2015
Always Best Corporation
Anywhere, USA

You have given your consent to allow Largess, Ottiter and Co., CPAs, as independent auditors for Always Best Corporation (ABC), access to our audit documentation for our audit of the December 31, 2013, financial statements of ABC. You also have given your consent to us to respond fully to Largess, Ottiter and Co., CPAs inquiries. You understand and agree that the review of our audit documentation is undertaken solely for the purpose of obtaining an understanding about ABC and certain information about our audit to assist Largess, Ottiter and Co., CPAs in planning and performing the audit of the December 31, 2014, financial statements of ABC.

Please confirm your agreement with the foregoing by signing and dating a copy of this letter and returning it to us. Attached is the form of the letter we will furnish Largess, Ottiter and Co., CPAs regarding the use of the audit documentation.

Very truly yours,
Fred E. Cessor, CPA
By: Fred Cessor

Accepted:

Always Best Corporation
By: Prez A. Dent
Date: January 20, 2015

Exhibit C: Illustrative Successor Auditor Acknowledgment Letter (Ref: par. .A6 AU-C 510)
Paragraph .A6 states that the predecessor auditor may request that the successor auditor confirm in writing his or her agreement regarding the use of the predecessor auditor's audit documentation before permitting access to it.

The following letter is presented for illustrative purposes only and is not required by professional standards.

January 20, 2015
Largess, Ottiter and Co., CPAs
Anywhere, USA

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the December 31, 2013, financial statements of Always Best Corporation (ABC). We rendered a report on those financial statements and have not performed any audit procedures subsequent to the audit report date. In connection with your audit of ABC's 2014 financial statements, you have requested access to our audit documentation prepared in connection with that audit. ABC has authorized our firm to allow you to review that audit documentation.

Our audit, and the audit documentation prepared in connection therewith, of ABC's financial statements were not planned or conducted in contemplation of your review. Therefore, items of possible interest to you may not have been specifically addressed. Our use of professional judgment and the assessment of audit risk and materiality for the purpose of our audit mean that matters may have existed that would have been assessed differently by you. We make no representation about the sufficiency or appropriateness of the information in our audit documentation for your purposes.

We understand that the purpose of your review is to obtain information about ABC and our 2013 audit results to assist you in planning and performing your 2014 audit of ABC. For that purpose only, we will provide you access to our audit documentation that relates to that objective. Upon request, we will provide copies of audit documentation that provide factual information about ABC. You agree to subject any such copies or information otherwise derived from our audit documentation to your normal policy for retention of audit documentation and protection of confidential entity information.

Furthermore, in the event of a third-party request for access to your audit documentation prepared in connection with your audits of ABC, you agree to obtain our permission before voluntarily allowing any such access to our audit documentation or information otherwise derived from our audit documentation, and to obtain on our behalf any releases that you obtain from such a third party. You agree to advise us promptly and provide us a copy of any subpoena, summons, or other court order for access to your audit documentation that includes copies of our audit documentation or information otherwise derived therefrom.

Please confirm your agreement with the foregoing by signing and dating a copy of this letter and returning it to us.

Very truly yours,
Fred E. Cessor, CPA
By: Fred Cessor

Accepted:

Largess, Ottiter and Co., CPAs
By: Ottit Pardner
Date: January 25, 2015

More Information
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  • Performing Auditing Tests of Balances Procedures
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  • A Practical Potpourri of Time Savings on Audits
  • The Financial Reporting Framework for Small- and Medium-Sized Entities

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Related articles:

Clarified Auditing Standards: Opening Balances (AU-C Section 510) – Part 1
Clarified Auditing Standards: Opening Balances (AU-C Section 510) – Part 2

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