Which of the following factors most likely would cause a CPA to decline to accept a new audit engagement?

Question

Quizplus · Accepted Answer

Choice "D" is correct. If a prospective client is unwilling to permit inquiry of its legal counsel, the CPA must consider the implications of this refusal. Such refusal may indicate a lack of cooperativeness on the part of management, or an attempt to be less than forthright with respect to litigation, claims, and assessments. Furthermore, a client's refusal to permit inquiry of its legal counsel ordinarily would result in a disclaimer of opinion. It would be unlikely that a CPA would accept a new engagement under these circumstances. Choice "A" is incorrect. An understanding of the client's operations and industry should be obtained during the planning stage of the audit. It does not necessarily need to be obtained before acceptance of the engagement. Choice "B" is incorrect. The fact that the entity has had recurring operating losses may increase the auditor's assessment of risk on the engagement, but it would not preclude acceptance of the engagement. Choice "C" is incorrect. Although the predecessor's audit documentation provides some audit evidence with respect to opening balances, consistency of accounting principles, and other matters of continuing significance, alternative means of obtaining such evidence generally do exist.

Which of the Following Factors Most Likely Would Cause a CPA