AU 315 is the professional standard that is utilized in order to ensure the importance of client acceptance decisions. The successor auditor is responsible for initiating communication with the predecessor auditor. This communication serves to inform the successor auditor if the client lacks integrity or if there were any issues regarding accounting principles, audit procedures, or fees. It is vital to receive this communication from the previous auditor before accepting the audit engagement. In addition to contacting the previous auditor, it is also necessary for the firm to reach out to local banks, lawyers, other CPA firms, and other businesses.
The firm should also conduct a background check on the potential client. 2. If John Jones suggested that I offer him a loan and, instead of providing an asset as collateral, he offered a lump sum of cash that covered the entire loan amount, warning signs would have triggered in my mind. In my accounting office, this transaction would never take place. CPAs have both a professional and moral obligation to report clients’ illegal activities. If the illegal activity is not resolved after reporting it to the board or audit committee, then the proper authorities should be contacted. Forehand’s cooperation with Jones had an impact on his wife, children, employees, clients of the audit company, and Jones himself. Forehand had a responsibility to uphold a reputation that would not tarnish his family’s reputation to himself and his wife and children. Regarding his employees and clients, it was his responsibility to demonstrate independence as an auditor and uphold integrity. Lastly, he owed it to John Jones to show that he followed the law and was unwilling to compromise ethical standards.
Forehands family was impacted by his imprisonment and the loss of income he provided for them. His workers also suffered from job loss and damage to their reputation due to their association with an employer involved in a money laundering scheme. Both Forehand and Jones ended up being imprisoned due to Forehands refusal to agree to the loan agreement. A crucial strategy for a CPA firm is to thoroughly understand the background of a potential client. This involves conducting an investigation and background check on the business owner or a new startup.
In addition, the firm should also consult local banks, lawyers, and businesses to ensure the integrity of the potential client. Completing all these steps diligently should help the firm steer clear of any involvement with unethical, immoral, or potentially criminal activities. However, it does not provide an absolute guarantee. I also believe that Mr. Forehand made a poor decision in this matter. It was evident to Mr. Jones during his initial meeting with Mr. Forehand that he was facing financial difficulties and was overly eager to accept any client, which ultimately created an opportunity for him to participate in the money laundering scheme.
