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

Mehta & Co were the statutory auditors of Anand Pharma Ltd. At the AGM, although willing, they were not reappointed. Mehta & Co sent a statement to the management for circulation among shareholders. Under the guidelines of the Ethical Standards Board, what is the duty of Mehta & Co and of the incoming auditor, Desai & Co?

Mehta & Co must file with the Institute a copy of the statement sent to management for circulation among shareholders. Desai & Co, the incoming auditor, must obtain a copy from the company and consider it before accepting the appointment.

  1. AMehta & Co need do nothing; Desai & Co may accept without any inquiry
  2. BMehta & Co file a copy of the statement with the Institute; Desai & Co must obtain a copy from the company and consider it before acceptingCorrect
  3. CMehta & Co must send the statement only to the Registrar; Desai & Co must wait one year
  4. DDesai & Co must file the statement with the Institute; Mehta & Co need not obtain anything

Explanation

Where an auditor willing for reappointment has not been reappointed, he files with the Institute a copy of the statement sent to the company's management for circulation among shareholders. The incoming auditor must obtain a copy from the company and consider it before accepting. The option leaving Desai & Co free of inquiry is wrong because the obligation is mandatory.

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