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CA Final · Advanced Auditing, Assurance and Professional Ethics · Professional Ethics & Liabilities of Auditors

CA Farah is asked by the proposed auditor of Lotus Realty Ltd. to discuss the affairs of the company, which she audited earlier. The proposed auditor says that the discussion would help him decide on the appointment. What is the correct position under the Code of Ethics?

Farah remains bound by confidentiality, so she may discuss the client's affairs with the proposed auditor only as permitted or required. The deciding factors are whether the client has given permission and what the legal and ethics requirements on such communications and disclosure say.

  1. AShe may share all information freely, since professional courtesy overrides confidentiality
  2. BShe must refuse to communicate in every case, whatever the law says
  3. CShe is bound by confidentiality, and whether she may or must discuss depends on client permission and on legal and ethics requirements on such communicationsCorrect
  4. DShe may discuss only if the proposed auditor pays her a fee for the information

Explanation

An existing or predecessor accountant is bound by confidentiality. Whether discussion is permitted or required depends on the nature of the engagement, whether the client has given permission, and the legal and ethics requirements relating to such communications and disclosure. Option B is wrong because some communication may be permitted or required.

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