Page 405 - CA Final PARAM Digital Book.

➢ A chartered accountant in practice is deemed to be guilty of professional misconduct if he accepts a
position as auditor previously held by another chartered accountant or a certified auditor who has
been issued certificate under the Restricted Certificates Rules 1932, without first communicating
with him in writing.
Part III – Case Discussion
➢ In the instant case, BC & Co. accepted GST– audit under State Level Act, carried out by another firm
of chartered accountants in the previous year, without prior communication with the previous
auditor.
Part IV – Conclusion
➢ A communication is mandatory requirement for all types of audit, if the previous auditor is a
chartered accountant. Hence, the firm is guilty of professional misconduct.

First Schedule, Part I,Cl,8 –Communication (Previous Old Course—(M21E)
QNO Auditor Changed Because of Qualified Report)
704.500
TITANIUM CNO – PE.1220
Vineet & Associates have been offered Statutory Audit of TLP Ltd. As a part of ethical requirements of the
Institute of Chartered Accountants, CA. V, partner of the firm, communicated with the previous auditor
enquiring as to whether any professional reason exists for which he should not accept the audit

assignment. Previous auditor informed that he issued a qualified report, so management is changing
the auditor. Comment with reference to the provisions of the Chartered Accountants Act, 1949 and
schedules thereto as to whether Vineet & Associates can accept the audit.
Answer As per Clause (8) of Part I of First Schedule to the Chartered Accountants Act, 1949, a Chartered
Accountant in practice will be deemed to be guilty of professional misconduct if he accepts a position
as auditor previously held by another chartered accountant or a certified auditor who has been issued
certificate under the Restricted Certificate Rules, 1932 without first communicating with him in writing.

The professional reasons for not accepting an audit would be:
(a) Non-compliance of the provisions of Sections 139 and 140 of the Companies Act, 2013 as
mentioned in Clause (9) of the Part - I of First Schedule to The Chartered Accountants Act,
1949; and
(b) Non-payment of undisputed Audit Fees by auditees other than in case of Sick Units for carrying
out the Statutory Audit under the Companies Act, 2013 or various other statutes; and
(C) Issuance of a qualified report.

There is no rule, written or unwritten, which would prevent an auditor from accepting the
appointment offered to him under the circumstance of Issuance of qualified report. However, before
accepting the audit, he should ascertain the full facts of the case. For nothing will bring the profession
to disrepute so much as the knowledge amongst the public that if an auditor is found to be
“inconvenient” by the client, he could readily be replaced by another who would not displease the
client and this point cannot be too over-emphasised.

From the above it can be concluded that Vineet & Associates may accept the audit of TLP Ltd if CA V is
satisfied that the attitude of the retiring auditor was not proper and justified. If, on the other hand, CA
V feels that the retiring auditor had qualified the report for good and valid reasons, he should refuse
to accept the audit of TLP Ltd.

First Schedule, Part I,Cl,9 -- Relied on Management Old Course--(N21E)
QNO Certificate
704.600
TITANIUM CNO – PE.1220
CA Mehta was appointed as the Auditor of CS Ltd. for the year 2020-21 in the place of retiring auditor CA
Gupta. CA Mehta accepted the appointment after obtaining a certificate from the management that the

provisions of the Sections 139 and 140 of the Companies Act, 2013 have been complied with.
Comment with reference to the Chartered Accountants Act, 1949 and schedules thereto.
Answer In the given case, CA Mehta accepted the appointment in place of retiring auditor after obtaining a
certificate from the management that the provisions of the Sections139 and 140 of the Companies Act,
2013 have been complied with.
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