If a Company Refuses Permission to Contact Its Previous Audit

question 79

Multiple Choice

If a company refuses permission to contact its previous audit firm, what should the new auditor do?

• A)Consider the implications of that refusal when deciding whether to accept the engagement.
• B)Contact potential third parties to gain information about the client firm.
• C)Review newspaper and magazine articles about the client.
• D)Do a background check on the CEO of the company.

---

Definitions:

Depreciation

The systematic allocation of the depreciable amount of an asset over its useful life.

Balance Sheet

A balance sheet is a financial statement that provides a snapshot of a company's financial position, including assets, liabilities, and shareholders' equity at a specific point in time.

Vertical Analysis

A financial analysis method that expresses each item in a financial statement as a percentage of a base figure, facilitating ratio comparisons across companies and time periods.

Revenue Recognition Principle

An accounting principle that outlines the specific conditions under which revenue is recognized and dictates that revenue should be recognized in the accounting period in which it is earned.