9900000000001 SEC 400 AR 00400
User Manual: SEC-400
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Communications Between Predecessor and Successor Accountants 2665
AR Section 400
Communications Between Predecessor and
Successor Accountants
Issue date, unless
otherwise indicated:
December 1981
See section 9400 for interpretations of this section.
Source: SSARS No. 4; SSARS No. 7;
SSARS No. 9; SSARS No. 15; SSARS No. 17
.01 This section provides guidance on communications between a pre-
decessor and successor accountant when the successor accountant decides to
communicate with the predecessor accountant regarding acceptance of an en-
gagement to compile or review the nancial statements of a nonissuer.[1] This
section also provides guidance on inquiries a successor accountant may wish
to make of a predecessor, and the predecessor's responses, to facilitate the con-
duct of the successor's compilation or review engagement. It also requires a
successor accountant who becomes aware of information that leads him or her
to believe the nancial statements reported on by the predecessor accountant
may require revision to request that the client communicate this information
to the predecessor accountant. [As amended, effective for periods ending af-
ter December 15, 1993, by Statement on Standards for Accounting and Re-
view Services (SSARS) No. 7. As amended, effective November 2002, by SSARS
No. 9.]
.02 The following denitions apply for purposes of this section:
Successor accountant. An accountant who has been invited to make a pro-
posal for an engagement to compile or review nancial statements and is
considering accepting the engagement or an accountant who has accepted
such an engagement.
Predecessor accountant. An accountant who (a) has reported on the most re-
cent compiled or reviewed nancial statements or was engaged to perform,
but did not complete, a compilation or review of the nancial statements,
and (b) has resigned, declined to stand for reappointment, or been notied
that his or her services have been or may be terminated.
[As amended, effective November 2002, by SSARS No. 9.]
Inquiries Regarding Acceptance of an Engagement
.03 A successor accountant is not required to communicate with a prede-
cessor accountant in connection with acceptance of a compilation or review en-
gagement, but he or she may believe it is benecial to obtain information that
will assist in determining whether to accept the engagement. The successor
[1] [Footnote deleted, November 2002, by the issuance of Statement on Standards for Accounting
and Review Services (SSARS) No. 9.]
©2016, AICPA AR §400.03
2666 Statements on Standards for Accounting and Review Services
accountant may consider making inquiries of the predecessor accountant when
circumstances such as the following exist:[2]
a. The information obtained about the prospective client and its manage-
ment and principals is limited or appears to require special attention.
b. The change in accountants takes place substantially after the end of
the accounting period for which statements are to be compiled or re-
viewed.
c. There have been frequent changes in accountants.
The successor accountant should bear in mind that the predecessor accoun-
tant and the client may have disagreed about accounting principles, proce-
dures applied by the predecessor accountant, or similarly signicant matters.
[As amended, effective November 2002, by SSARS No. 9.]
.04 The successor accountant should request permission from the prospec-
tive client to make any inquiries of the predecessor accountant. Except as per-
mitted by the AICPA Code of Professional Conduct, an accountant is precluded
from disclosing any condential information obtained in the course of an en-
gagement unless the client specically consents. Accordingly, if the successor
accountant decides to communicate with the predecessor, the successor accoun-
tant should request the client to (a) permit the successor accountant to make
inquiries of the predecessor accountant and (b) authorize the predecessor ac-
countant to respond fully to those inquiries.3If the prospective client refuses to
permit the predecessor accountant to respond or limits the response, the succes-
sor accountant should inquire about the reasons and consider the implications
of that refusal in connection with acceptance of the engagement. [As amended,
effective November 2002, by SSARS No. 9.]
.05 When the successor accountant decides to communicate with the pre-
decessor accountant, the inquiries may be oral or written. The inquiries should
be specic and reasonable regarding matters that will assist the successor ac-
countant in determining whether to accept the engagement. Matters subject
to inquiry would include (a) information that might bear on the integrity of
management (owners), (b) disagreements with management (owners) about ac-
counting principles or the necessity for the performance of certain procedures
or similarly signicant matters, (c) the cooperation of management (owners) in
providing additional or revised information, if necessary, (d) the predecessor's
knowledge of any fraud or illegal acts perpetrated within the client, and (e)the
predecessor's understanding of the reason for the change of accountants. [As
amended, effective November 2002, by SSARS No. 9.]
.06 The predecessor accountant should respond promptly and fully to the
inquiries, on the basis of known facts. However, if the predecessor accountant
decides, due to unusual circumstances 4such as impending, threatened, or po-
tential litigation; disciplinary proceedings; or other unusual circumstances, not
to respond fully to the inquiries, the predecessor accountant should indicate
that the response is limited. The successor accountant should consider the im-
plications of a limited response in connection with acceptance of the engage-
ment. [As amended, effective November 2002, by SSARS No. 9.]
[2] [Footnote deleted, November 1992, by the issuance of SSARS No. 7.]
3The successor accountant is not precluded from making these inquiries before making a proposal
for the engagement.
4Unpaid fees, as discussed in paragraph .08, are not considered to be an unusual circumstance
for purposes of this paragraph; however, see paragraph .08.
AR §400.04 ©2016, AICPA
Communications Between Predecessor and Successor Accountants 2667
Other Inquiries
[.07] [Paragraph deleted, November 2002, by the issuance of SSARS
No. 9.]
.08 The successor accountant also may wish to review the predeces-
sor's engagement documentation (terms such as working papers or workpa-
pers are also sometimes used).[5] In these circumstances, the successor accoun-
tant should request the client to authorize the predecessor accountant to allow
access. It is customary in such circumstances for the predecessor accountant
to make himself or herself available to the successor accountant for consul-
tation and to make available for review certain engagement documentation.
The predecessor accountant should determine which documentation is to be
made available for review and which may be copied. Ordinarily, the predecessor
accountant should provide the successor accountant access to documentation
relating to matters of continuing accounting signicance and those relating
to contingencies. Valid business reasons (including but not limited to unpaid
fees), however, may lead the predecessor to decide not to allow access to the
documentation.6The predecessor accountant may decide to reach an under-
standing with the successor accountant about the use of the documentation.7
Further, when more than one accountant is considering acceptance of an en-
gagement, the predecessor accountant should not be expected to make himself
or herself or his or her documentation available until the client has designated
one of those accountants as the successor accountant. [As amended, effective
November 2002, by SSARS No. 9. Revised, December 2010, to reect conform-
ing changes necessary due to the issuance of SSARS No. 19.]
Successor Accountant’s Use of Communications
.09 The successor accountant should not make reference to the report or
work of a predecessor accountant in his or her own report, except as specically
permitted by section 200, Reporting on Comparative Financial Statements,with
respect to the nancial statements of a prior period. [As amended, effective
November 2002, by SSARS No. 9. As amended, effective for compilations and
reviews of nancial statements for periods ending on or after December 15,
2007, by SSARS No. 15.]
Financial Statements Reported on by
Predecessor Accountant
.10 If, during the engagement, the successor accountant becomes aware
of information that leads him or her to believe that nancial statements re-
ported on by the predecessor accountant may require revision, the successor
accountant should request the client to communicate this information to the
[5] [Footnote deleted, December 2010, to reect conforming changes necessary due to the issuance
of SSARS No. 19].
6See the "Records Request" interpretation (ET sec. 1.400.200) under the "Acts Discreditable
Rule" (ET sec. 1.400.001), for guidance on what constitutes an accountant's working papers. [Footnote
added, April 30, 1982, by the Accounting and Review Services Committee. Footnote revised, January
2015, to reect conforming changes necessary due to the issuance of the revised AICPA Code of Pro-
fessional Conduct, effective December 15, 2014.]
7Before permitting access to the documentation, the predecessor accountant may wish to obtain
a written communication from the successor accountant regarding the use of the documentation. The
exhibit contains an illustrative successor accountant acknowledgment letter. [Footnote added, effec-
tive November 2002, by SSARS No. 9. Footnote revised, December 2010, to reect conforming changes
necessary due to the issuance of SSARS No. 19.]
©2016, AICPA AR §400.10
2668 Statements on Standards for Accounting and Review Services
predecessor accountant. Paragraphs .47–.52 of section 80, Compilation of Fi-
nancial Statements, and paragraphs .54–.59 of section 90, Review of Financial
Statements, provide guidance to the predecessor accountant in determining an
appropriate course of action with respect to compilation and review engage-
ments, respectively. [As amended, effective November 2002, by SSARS No. 9.
Revised, May 2004, to reect conforming changes necessary due to the issuance
of SSARS No. 10. Revised, July 2005, to reect conforming changes necessary
due to the issuance of SSARS No. 12. Revised, December 2010, to reect con-
forming changes necessary due to the issuance of SSARS No. 19.]
.11 If the client refuses to communicate with the predecessor accountant
or if the successor accountant is not satised with the predecessor accountant's
course of action, the successor accountant should evaluate (a) possible implica-
tions for the current engagement and (b) whether to resign from the engage-
ment. Furthermore, the successor accountant may decide to consult with le-
gal counsel in determining an appropriate course of further action. [Paragraph
added, effective November 2002, by SSARS No. 9.]
AR §400.11 ©2016, AICPA
Communications Between Predecessor and Successor Accountants 2669
.12
Exhibit
Illustrative Successor Accountant Acknowledgment Letter
Paragraph .08 footnote 7 states, "Before permitting access to the documenta-
tion, the predecessor accountant may wish to obtain a written communication
from the successor accountant regarding the use of the documentation." The
following letter is presented for illustrative purposes only and is not required
by professional standards.
[Date]
[Successor Accountant]
[Address]
We have previously [reviewed or compiled], in accordance with Statements on
Standards for Accounting and Review Services the December 31, 20X1, nan-
cial statements of ABC Enterprises (ABC). In connection with your [review or
compilation] of ABC's 20X2 nancial statements, you have requested access
to our documentation prepared in connection with that engagement. ABC has
authorized our rm to allow you to review that documentation.
Our [review or compilation], and the documentation prepared in connection
therewith, of ABC's nancial statements was not planned or conducted in con-
templation of your [review or compilation]. Therefore, items of possible interest
to you may not have been specically addressed. Our use of professional judg-
ment for the purpose of this engagement means that matters may have existed
that would have been assessed differently by you. We make no representation
about the sufciency or appropriateness of the information in our documenta-
tion for your purposes.
We understand that the purpose of your review of our documentation is to ob-
tain information about ABC and our 20X1 [compilation or review] procedures
to assist you in planning your 20X2 [compilation or review] of the nancial
statements of ABC. For that purpose only, we will provide you access to our
documentation that relate to that objective.
Upon request, we will provide copies of the documentation that provide factual
information about ABC. You agree to subject any such copies, or information
otherwise derived from our documentation, to your normal policy for retention
of documentation and protection of condential client information. Further-
more, in the event of a third-party request for access to your documentation
prepared in connection with your (reviews or compilations) of ABC, you agree
to obtain our permission before voluntarily allowing any such access to our doc-
umentation or information otherwise derived from our documentation, and to
obtain on our behalf any releases that you obtain from such third party. You
agree to advise us promptly and provide us a copy of any subpoena, summons,
or other court order for access to your documentation that include copies of our
documentation or information otherwise derived therefrom.
Please conrm your agreement with the foregoing by signing and dating a copy
of this letter and returning it to us.
Very truly yours,
[Predecessor Accountant]
By: ___________________________
Accepted:
[Successor Accountant]
By: ___________________________ Date: __________________
©2016, AICPA AR §400.12
2670 Statements on Standards for Accounting and Review Services
Even with the client's consent, access to the predecessor accountant's documen-
tation may still be limited. Experience has shown that the predecessor accoun-
tant may be willing to grant broader access if given additional assurance con-
cerning the use of the documentation. Accordingly, the successor accountant
might consider agreeing to the following limitations on the review of the pre-
decessor accountant's documentation in order to obtain broader access:
•The successor accountant will not comment, orally or in writing, to
anyone as a result of the review about whether the predecessor ac-
countant's engagement was performed in accordance with Statements
on Standards for Accounting and Review Services.
•The successor accountant will not provide expert testimony or litiga-
tion services or otherwise accept an engagement to comment on issues
relating to the quality of the predecessor accountant's engagement.
The following paragraph illustrates the above:
Because your review of our documentation is undertaken solely for the purpose
described above and may not entail a review of all our documentation, you agree
that (1) the information obtained from the review will not be used by you for
any other purpose, (2) you will not comment, orally or in writing, to anyone as
a result of that review about whether our engagement was performed in accor-
dance with Statements on Standards for Accounting and Review Services, (3)
you will not provide expert testimony or litigation services or otherwise accept
an engagement to comment on issues relating to the quality of our engagement.
[Paragraph added, effective November 2002, by SSARS No. 9. Revised, Septem-
ber 2005, to reect conforming changes necessary due to the Accounting and
Review Services Committee. Revised, December 2010, to reect conforming
changes necessary due to the issuance of SSARS No. 19.]
AR §400.12 ©2016, AICPA
