Reference no: EM133247047

RightSide CPAs are getting ready to start the audit of Newsome Enterprises. This will be the third year that RightSide CPAs have provided auditing and attestation services to this client. The client is a large, well diversified firm and has been in business for many years. It has come to the attention of the audit partners responsible for the engagement that the client has just undergone a significant restructuring. Which of the following choices best represents the auditor's response to this news?

1) The audit partners should attempt to understand significant details of the restructure, and whether the restructure may have caused impairments to objectivity and independence in areas such as internal audit.

2) The audit partners should contact both client management and the client's internal audit function, requesting details of the restructure and written assurances that inherent risk has not increased.

3) The auditor should immediately contact the client's management and notify them of their intention to withdraw from the engagement, due to increased inherent risk.

4) The client's restructure is of no concern to the external auditors, and does not pose any problems or threats that the auditors should consider in their next audit.