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CA Intermediate · Auditing and Ethics · Ethics and Terms of Audit Engagements

CA Tanvi Shah is asked to accept the audit of Greenfield Agro Ltd. The existing auditor, CA Pradeep Joshi, has not yet vacated office and has not been communicated with. Under the Code of Ethics (Chartered Accountants Act, 1949, First Schedule), what should CA Shah do before accepting the audit?

CA Shah must first communicate in writing with the existing auditor to ascertain whether any professional reasons exist against accepting the appointment. Accepting an audit without this prior communication is professional misconduct under the Code of Ethics, so informing the predecessor afterwards would not be adequate.

  1. AAccept the audit immediately since the company has approached her first
  2. BCommunicate with the existing auditor in writing to ascertain whether there are professional reasons why she should not accept the appointmentCorrect
  3. CAccept the audit but inform the existing auditor after the appointment is made
  4. DSeek approval from the Central Government before accepting the audit

Explanation

Under the Code of Ethics, a member who is approached to take over an audit must communicate with the existing auditor in writing before accepting, to find out whether there are professional or other reasons why the appointment should not be accepted. Accepting without this communication is professional misconduct. Informing the predecessor after accepting, or seeking Central Government approval, is not the required step.

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