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

Three joint auditors audit Kaveri Foods Ltd. Work on the plants was divided among them, but the audit of related party transactions was not divided and was done by all. Later, a material misstatement in related party disclosures goes undetected. Another misstatement arose in a plant's fixed assets allotted solely to joint auditor A. Which conclusion is correct?

All three are jointly and severally responsible for the undivided related party audit area, while A alone is responsible for the fixed assets work allotted to him. Responsibility for divided work is individual; responsibility for work carried out by all is joint and several.

  1. AOnly A is responsible for both misstatements
  2. BAll three are jointly and severally responsible for the undivided related party area; A alone is responsible for the plant fixed assets work allotted to himCorrect
  3. CEach auditor is responsible only for the plant allotted to him, including the related party area
  4. DNone is responsible if the audit was divided in writing

Explanation

Each joint auditor is responsible only for the work allocated to him, including proper execution of procedures. All joint auditors are jointly and severally responsible for audit work not divided and carried out by all. The related party area was undivided, so all are liable; the plant assets fall on A. Option one wrongly puts both on A.

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