Auditing and Assurance Services 9th Edition by Alvin Arens,Mark Beasley,Randy Elder

Exercise 20

Perez , CPA, has been asked by a nonpublic company audit entity to perform a nonrecurring engagement involving implementing an IT information and control system. The entity requests that, in setting up the new system and during the period prior to conversion to the new system, Perez
• Counsel on potential expansion of business activity plans.
• Search for and interview new personnel.
• Hire new personnel.
• Train personnel.
In addition, the entity requests that, during the three months subsequent to the conversion, Perez
• Supervise the operation of the new system.
• Monitor entity-prepared source documents and make changes in basic IT-generated data as Perez may deem necessary without the concurrence of the entity.
Perez responds that he may perform some of the services requested but not all of them.
Required:
a. Which of these services may Perez perform, and which of them may Perez not perform?
b. Before undertaking this engagement, Perez should inform the entity of all significant matters related to the engagement. What are these significant matters that should be included in the engagement letter?
(AICPA, adapted)