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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Code of Ethics for Professional Accountants

Orion Assurance is invited to tender for the audit of Zenith Ltd. The outgoing auditor's partner tells Orion's partner that the finance director was dismissed after disagreements over revenue. Before accepting the appointment, what must Orion do under the Code?

Orion should request Zenith's permission to communicate with the existing auditor. If Zenith refuses, Orion should consider whether to accept the appointment, since refusal is a warning sign. Acting on an informal verbal comment or contacting the predecessor only after accepting would not satisfy the Code's requirements.

  1. ARely on the verbal comment and decline without further enquiry
  2. BAccept the appointment and write to the outgoing auditor only once the first audit is complete
  3. CAsk Zenith's finance director for permission to contact the outgoing auditor and then decline to communicate with them if refused
  4. DRequest permission from Zenith to communicate with the existing auditor, and if refused, consider whether to accept the appointmentCorrect

Explanation

A proposed auditor should ask the prospective client for permission to contact the existing auditor to gather information on whether to accept. If permission is refused, the proposed auditor should consider whether to accept the engagement, as refusal is itself a warning sign. Waiting until after the audit, or relying on hearsay, does not meet the requirement.

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