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

Rao & Co and Iyer & Associates are appointed joint auditors of Kaveri Textiles Ltd. They divided the work by identifiable units and documented the division. While auditing Unit A, a partner of Rao & Co finds that a related-party balance appearing in Unit B (audited by Iyer & Associates) appears misstated. What should the Rao & Co partner do under the Code of Ethics and SA 299 (Revised)?

The partner should communicate the matter in writing to the other joint auditor before the audit is completed. Matters that are relevant to another joint auditor's area and deserve attention must be shared. Responsibility for allocated work does not excuse silence on such matters.

  1. ACommunicate the matter in writing to the other joint auditor before completion of the audit, since it is relevant to that joint auditor's areaCorrect
  2. BIgnore it, because each joint auditor is responsible only for the work allocated to him
  3. CRevise the audit of Unit B on his own and issue a separate report on it
  4. DMention it only to the company's management and not to the other joint auditor

Explanation

Where a joint auditor comes across matters relevant to the areas of other joint auditors that deserve their attention, he should communicate them to all the other joint auditors in writing before the audit is completed. Option B is wrong because the limited responsibility for allocated work does not remove this duty of communication.

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