step away.
by ed mendlowitz
managing an accounting practice: 202 questions and answers
q: i have a friend who runs a small cpa firm. he has a client who owns some motels across the u.s. who sold them to a large company.
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their auditor, a big 4 firm, would like to review his prior year audit papers and he has asked me to review his work papers beforehand and make sure that they are in good shape for the big 4 firm. as he is a small practice, his work papers are likely to be not as sophisticated as the big 4 is used to seeing.
do you know to what extent he would be required to show his work? would it be sufficient to show the trial balance with a narrative indicating the work performed on each line item that is deemed to be in scope? would it be sufficient to show a checklist indicating the procedures performed? would he be required to show all the detailed work papers?
a: if he performed an audit and followed proper procedures including being peer reviewed, then his work papers should be in order and not need any oversight by you.
based upon our conversation it seems this cpa did not do the minimum work required for an audit, did not use applicable checklists and audit programs, was not peer reviewed and is in serious violation of state licensing requirements. if he is an aicpa member, he also is in breach of their requirements. it also is clear to me that you are not competent to review his work. i suggest you pass on this. he has a problem that he does not understand.
i am glad i don’t know who he is, and that he didn’t call me. if he did, i would certainly talk to him. i am posting this as a precaution to other small practitioners that issue “audit” reports where they do not do the prescribed work. you need to do what needs to be done!