Reissues, Engagement Letters, ADR, and Unpaid Fees Flashcards
What are reissued reports? What are the rules with independence?
Covered members or their firms that were independent when they first issued an audit report MAY reissue that report or consent to its incorporation by reference, even if they are no longer independent.
Example: What if your firm issued a report for a client and they switch to another firm. You don’t have worry about being independent and you invest in that company. They come back to you and they would like to use the audit report for a potential investor.
Basically you can give them the audit report HOWEVER you cannot perform new procedures that would require updating the date of the original report.
YOU CAN make inquires of successor auditors, reading subsequent F/S, or undertaking other procedures to assess the effect of new facts on the original report.
What engagement contractual terms? What are the rules related to independence?
Engagements have contractual terms written by lawyers which spells out the terms for each party.
You cannot have a provision in the contract which states you will not be liable for any mess ups.
Engagement letters CAN have a statement to require a client to indemnify the firm for mistakes made and the management of your client KNEW about the mistakes.
It is an independence violation for a covered member to agree to indemnify the attest client for losses resulting from the clients own act.
What is Alternative Dispute Resolution (ADR)? What are the rules related to independence?
Way to settle a dispute without going through the litigation process.
Engagement letters may require ADR in lieu of to resolve disputes relating to past litigation.
ADR could place a MIPP and the client in positions of material adverse interest and thereby impair independence.
How do unpaid fees impact independence?
- A MIPP may NOT sign a current-year audit report if it is has unpaid fees from the client for services provided MORE THAN ONE YEAR PRIOR
- Fees are “unpaid” even if they are unmilled or if the client has issued to the firm a note receivable
