WHAT TO EXPECT FROM PREDECESSOR AND SUCCESSOR ACCOUNTANTS

CPA Newfoundland & Labrador receives many questions regarding what information to share with the successor accountant and what can be asked for from the predecessor accountant. 

The Rules of Professional Conduct 300 series sets out the cooperation requirements between the predecessor and successor accountant. 

WHAT IS THE SUCCESSOR ACCOUNTANT REQUIRED TO DO? 
Per Rule 302.1, the successor accountant shall not accept an engagement without first communicating with the predecessor accountant and enquiring whether there are any circumstances that should be considered that may influence the decision whether to accept the engagement. Per Rule 302.2 the predecessor accountant is required to promptly respond to the communication and must advise the successor whether they withdrew or resigned from the engagement.    If the predecessor is aware  of circumstances which might influence the decision to accept an engagement but such circumstances cannot be disclosed due to confidentiality (ie. suspected fraud) the predecessor should state that there are, in the opinion of the predecessor, circumstances that should be taken into account, but that they cannot be disclosed without the consent of the client. In certain circumstances where confidentiality is in doubt consideration should be given to obtaining legal advice. The successor accountant must do a reasonable job to follow up to receive the correspondence prior to accepting the engagement. 

WHAT IS THE PREDECESSOR ACCOUNTANT REQUIRED TO DO? 
Per Rule 303.1, the predecessor, upon written request of the client, and on a timely basis, shall supply reasonable and necessary client information to the successor. Further, the predecessor is required to cooperate promptly to the client, or on the client’s instructions, to the successor. The predecessor shall provide all property of the client’s in their possession in the medium that will facilitate a timely and efficient transfer. Electronic documents may be provided electronically rather than in paper format, as this best serves the client’s interest. As the rule indicates that the property of the client shall be transferred, any working papers developed by the firm as part of their procedures to complete the engagement are not required to be transferred. However, the firm may choose to do so. Copies of the trial balance, ledgers, continuity schedules that facilitate the transfer of the information to serve the client’s best interest are to be shared. If the client has not paid their fees, and this resulted in the firm resigning from the engagement, this information can be shared with the successor. For any questions on communication between the predecessor and successor accountant, please email [email protected].

We thank CPA SK for sharing this article with us.