Preconditions For Engagement Acceptance Practice Test

A nonissuer entity requests an audit. The engagement partner learns that the firm has a large unpaid prior-year consulting fee from the client, and the client proposes paying it after the audit report is issued. Based on the given facts, should the auditor accept the engagement?

A nonissuer entity requests an audit of financial statements prepared using a special purpose framework (cash basis) for a closely held owner. Management agrees to the framework but refuses to include a statement of cash flows because “it is not useful.” What action should the auditor take to ensure preconditions are met?