Reports on Audited Financial Statements
2175
or her previous report on the financial statements of a prior period that may
affect his or her previous report (for example, the successor auditor might in-
dicate in the response that certain matters have had a material effect on the
prior-period financial statements reported on by the predecessor auditor). In
such circumstances, the predecessor auditor should make inquiries and per-
form other procedures that he or she considers necessary (for example, review-
ing the working papers of the successor auditor as they relate to the matters
affecting the prior-period financial statements). The auditor should then de-
cide, on the basis of the audit evidence obtained, whether to revise the report.
If a predecessor auditor concludes that the report should be revised, he or she
should follow the guidance in paragraphs .68–.69 and .73 of this section. [Para-
graph renumbered by the issuance of Statement on Auditing Standards No. 79,
December 1995. Revised, March 2006, to reflect conforming changes necessary
due to the issuance of Statement on Auditing Standards No. 105.]
.73 A predecessor auditor's knowledge of the current affairs of his former
client is obviously limited in the absence of a continuing relationship. Conse-
quently, when reissuing the report on prior-period financial statements, a pre-
decessor auditor should use the date of his or her previous report to avoid any
implication that he or she has examined any records, transactions, or events
after that date. If the predecessor auditor revises the report or if the financial
statements are restated, he or she should dual-date the report. (See section
530, Dating of the Independent Auditor's Report, paragraph .05.) [Paragraph
renumbered by the issuance of Statement on Auditing Standards No. 79, De-
cember 1995.]
Predecessor Auditor’s Report Not Presented
.74 If the financial statements of a prior period have been audited by a
predecessor auditor whose report is not presented, the successor auditor should
indicate in the introductory paragraph of his or her report (a) that the financial
statements of the prior period were audited by another auditor,
29
(b) the date
of his or her report, (c) the type of report issued by the predecessor auditor,
and (d) if the report was other than a standard report, the substantive reasons
therefore.
30
An example of a successor auditor's report when the predecessor
auditor's report is not presented is shown as follows:
Independent Auditor's Report
We have audited the balance sheet of ABC Company as of December 31, 20X2,
and the related statements of income, retained earnings, and cash flows for the
year then ended. These financial statements are the responsibility of the Com-
pany's management. Our responsibility is to express an opinion on these finan-
cial statements based on our audit. The financial statements of ABC Company
as of December 31, 20X1, were audited by other auditors whose report dated
March 31, 20X2, expressed an unqualified opinion on those statements.
29
The successor auditor should not name the predecessor auditor in his or her report; however, the
successor auditor may name the predecessor auditor if the predecessor auditor's practice was acquired
by, or merged with, that of the successor auditor. [Footnote renumbered by the issuance of Statement
on Auditing Standards No. 79, December 1995. Footnote subsequently renumbered by the issuance
of Statement on Auditing Standards No. 85, November 1997. Footnote subsequently renumbered by
the issuance of Statement on Auditing Standards No. 93, October 2000.]
30
If the predecessor's report was issued before the effective date of this section and contained
an uncertainties explanatory paragraph, a successor auditor's report issued or reissued after the
effective date hereof should not make reference to the predecessor's previously required explanatory
paragraph. [Footnote added, effective for reports issued or reissued on or after February 29, 1996,
by Statement on Auditing Standards No. 79. Footnote renumbered by the issuance of Statement on
Auditing Standards No. 85, November 1997. Footnote subsequently renumbered by the issuance of
Statement on Auditing Standards No. 93, October 2000.]
AU §508.74