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

CA Nair is approached to become auditor of Zenith Pharma Ltd. in place of CA Pillai, the existing auditor. Nair wants to ask Pillai about the company's affairs. Pillai has not obtained the client's permission and is aware of no legal requirement to disclose. Under the Code of Ethics (Section 320), what is the correct position?

Pillai remains bound by confidentiality. Whether he can discuss Zenith Pharma's affairs with Nair depends on whether the client has given permission and on legal and ethics requirements for disclosure. With neither permission nor a legal requirement, he should not disclose.

  1. APillai must disclose everything, because a proposed accountant is entitled to full information
  2. BPillai may freely discuss since both are chartered accountants
  3. CPillai is bound by confidentiality, and whether he may discuss depends on client permission and legal and ethics requirementsCorrect
  4. DPillai may discuss only the fee details of the client

Explanation

An existing or predecessor accountant is bound by confidentiality. Whether he may or must discuss the client's affairs with a proposed accountant depends on the nature of the engagement, whether the client has given permission, and the legal and ethics requirements. Here there is neither permission nor any legal requirement, so option A is wrong.

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