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

Mehta & Co and Nair & Co are joint auditors of Sagar Foods Ltd and have divided the audit by areas. Later a dispute arises over a misstatement in the presentation and disclosure of the financial statements as a whole. Which conclusion is correct under the Code of Ethics and SA 299 (Revised)?

Both joint auditors are jointly and severally responsible for presentation and disclosure of the financial statements under the applicable financial reporting framework. This responsibility is not limited to the divided areas and cannot be apportioned by fees or left to management.

  1. AOnly the joint auditor who audited the related area is responsible for the disclosure
  2. BResponsibility is split in proportion to the audit fees received by each firm
  3. CBoth joint auditors are jointly and severally responsible for presentation and disclosure as required by the applicable financial reporting frameworkCorrect
  4. DNeither is responsible, because the management prepares the financial statements

Explanation

All joint auditors are jointly and severally responsible for examining statutory compliance of the financial statements, for presentation and disclosure under the applicable framework, and for ensuring that the audit report complies with statutes and standards. Option A is wrong because it applies the limited responsibility for allocated work to a matter that is common to all.

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