Smith, CPA, Has Requested Permission to Communicate with the Predecessor

question 6

Multiple Choice

Smith, CPA, has requested permission to communicate with the predecessor auditor in order to review certain workpapers for high risk accounts for a new audit client. The new audit client's refusal to allow this communication to occur would impact Smith's decision concerning

• A) the auditor's ability to design audit tests.
• B) possible scope exception due to lack of access.
• C) the desirability of accepting the prospective engagement.
• D) violation of the GAAP rules concerning consistency and comparability of financial information.

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Definitions:

Holder in Due Course

A legal term referring to a person who has received a negotiable instrument in good faith and for value, thereby having certain protections against defects in the instrument's title.

Shelter Rule

A legal principle in commercial law that allows a person who acquires goods in good faith to obtain certain rights even if the transferor of those goods did not have authority to sell.

Negotiation

A dialogue between two or more parties, aimed at reaching a mutual agreement or resolving a dispute over a particular issue or contract.

Duress

Duress is a condition where a person performs an act as a result of violence, threat, or other pressure against the person, often impacting the legality of agreements made under such conditions.