CA Final · Advanced Auditing, Assurance and Professional Ethics · Professional Ethics & Liabilities of Auditors
M/s Rao & Co. and M/s Sinha & Associates are appointed joint auditors of Veda Textiles Ltd. They divide the work by units and document the division, and they communicate it to the company. While auditing Unit A, a partner of Rao & Co. finds a related-party transaction that affects the area allotted to Sinha & Associates. What should the Rao & Co. partner do under the Code of Ethics and SA 299 (Revised)?
The Rao & Co. partner must tell all the other joint auditors about the matter in writing before the audit is completed. Responsibility for divided work does not remove this duty, because the matter is relevant to another joint auditor's area and may need disclosure or judgement.
- ADo nothing, because each joint auditor is responsible only for the work allocated to him
- BCommunicate the matter in writing to all other joint auditors before the audit is completedCorrect
- CReport the matter only to the management of Veda Textiles Ltd.
- DCommunicate the matter orally to Sinha & Associates after the audit report is signed
Explanation
Where a joint auditor comes across matters relevant to the areas of other joint auditors that deserve their attention or require disclosure or judgement, he should communicate them to all the other joint auditors in writing before the audit is completed. Option A is wrong because responsibility for the divided work does not remove this duty of communication.
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