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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional appointments

Tarn & Co is the auditor of Lowell Ltd. The directors tell Tarn & Co they intend to propose its removal because it has challenged the revenue recognition policy. Which response by Tarn & Co is most appropriate?

Tarn & Co should treat the proposed removal as a possible attempt to influence the audit, use any legal right to make representations to shareholders, and raise its concerns with those charged with governance. Destroying working papers or staying silent would be improper, and it should answer a successor's consented enquiries honestly.

  1. AConsider the removal as a possible attempt to influence the audit opinion, use the right to make representations to shareholders where law permits, and report concerns to those charged with governanceCorrect
  2. BImmediately withdraw and destroy the audit working papers to protect confidentiality
  3. CAccept removal quietly and give the successor auditor no information
  4. DRefuse to hand over any information to the successor even when the client consents

Explanation

Removal following a disagreement may signal management pressure on the audit. The auditor should use statutory rights to make representations, communicate with those charged with governance and ensure the circumstances are properly handled. Destroying papers is improper, and silence ignores the auditor's duties. With client consent the auditor should respond to the successor's enquiries honestly.

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