4830.1 If the prior period financial statements audited by the predecessor auditor are unchanged, the successor auditor should indicate in the introductory paragraph of his or her report that the financial statements of the prior period were audited by another auditor, the date of the predecessor auditor's report, the type of report issued by the predecessor auditor, and if the report was other than a standard report, the substantive reasons for it. The successor auditor ordinarily should indicate in its report that the other auditor has ceased operations. The successor auditor should not name the predecessor auditor in the report. [AI 23.61]
4830.2 If the financial statements audited by the ceased firm are restated, the successor auditor will need to either reaudit the financial statements, or in certain cases, audit only the restatement adjustments. The successor's auditor's report should state that the predecessor auditor reported on the prior financial statements before restatement. [AI 23.66]
4830.3 A full reaudit generally is necessary when the restatement adjustments include, but are not limited to:
  1. Corrections of an error;
  2. Reflection of a change in reporting entity;
  3. Retrospective application of change in accounting principle:
    1. with significant impact on previously reported amounts, or
    2. that affect previously reported net income or net assets;
  4. Reporting discontinued operations; and
  5. Changes affecting previously reported net income or net assets. [AI 23.70]
4830.4 If the successor auditor is engaged to audit only the restatement adjustments to the prior period financial statements that were audited by a predecessor auditor, the successor auditor must be able to form an opinion that the adjustments are appropriate and have been properly applied. In determining whether he or she can form such an opinion, the successor auditor should consider the extent of the adjustments, the reason for the adjustments, and the cooperation of the predecessor auditor. [PCAOB Staff Questions and Answers, "Adjustments to Prior-Period Financial Statements Audited by a Predecessor Auditor", Question 4]
4830.5 If the successor auditor is able to satisfy him or herself as to the appropriateness of the restatement adjustments, he or she may report on the restatement adjustments pursuant to the guidance in AS 3105.58. [AI 23.71]
4830.6 A successor auditor may audit the restatement adjustments in prior period financial statements audited by a predecessor auditor that has not ceased operations, so long as the auditor is independent and registered with the PCAOB.
4830.7 An auditor that is subsequently determined to be no longer independent of its client may reissue previously issued reports and consents to the use of those previously issued reports, as long as it was independent at the time of original issuance of the report. An auditor may perform the normal subsequent events procedures required by AS 4101 prior to reissuing a report. Situations in which other audit work would be necessary to reissue the report should be discussed with OCA prior to filing.
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