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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: Rao & Co audited Unit A and Iyer & Associates audited Unit B. During the audit, the partner of Iyer & Associates finds an unusual related-party balance in Unit B that bears on Unit A, which Rao & Co audits. What should Iyer & Associates do?

Iyer & Associates should communicate the matter in writing to Rao & Co before the audit is completed. A joint auditor who finds matters relevant to another joint auditor's area must share them in writing, even though audit work has been divided between them.

  1. ACommunicate the matter in writing to Rao & Co prior to completion of the auditCorrect
  2. BIgnore it, because each joint auditor is responsible only for the unit allotted to him
  3. CReport it only to the audit committee and not to the other joint auditor
  4. DWait until the audit report is signed and then inform Rao & Co orally

Explanation

Where a joint auditor finds 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. The option saying he is responsible only for his unit is wrong because the written-communication duty applies even though work is divided.

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