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CA Intermediate · Auditing and Ethics · Audit Documentation

Partners of Bhandari & Co., a CA firm, receive a notice for production of the audit file of Lotus Foods Ltd from a client's lender who wants to inspect working papers. The company has not authorised any disclosure. Which is the correct audit response?

The firm should decline unless the client consents or a legal or professional duty requires disclosure. Working papers belong to the auditor, but they remain subject to confidentiality, and a lender has no automatic right to inspect them.

  1. ADecline to hand over the working papers unless the client consents or a legal or professional duty requires disclosure, since they belong to the auditor but are confidentialCorrect
  2. BHand them over, as working papers are the property of the client who paid the fees
  3. CHand over only the working papers relating to loan covenants, as lenders have a right to the file
  4. DHand them over after redacting the auditor's conclusions

Explanation

Under SA 230 and the Code of Ethics, audit documentation is the property of the auditor, but it is subject to confidentiality. Disclosure without client consent is allowed only where there is a legal or professional right or duty to do so. A lender has no automatic right of access. The claim that the client owns the file is incorrect, and partial or redacted disclosure still breaches confidentiality.

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