Page 431 - CA Final PARAM Digital Book.

Part 3- SECOND SCHEDULE

Second Schedule, Part I, Cl,1 --Confidentiality Old Course-- (N10R, M14R, PM17, SM17, N20E, SM21)
QNO Breached While giving Information to Bank New Course- (SM23)
738.000
TITANIUM CNO – PE.1460
XYZ Co. Ltd. has applied to a bank for loan facilities. The bank on studying the financial statements of
the company notices that you are the auditor and requests you to call at the bank for a discussion. In
the course of discussions, the bank asks for your opinion regarding the company and also asks for
detailed information regarding a few items in the financial statements. The information is
available in your working paper file. What should be your response and why?
OR
Tiger Ltd. has applied to a bank for loan facilities. The bank on studying the financial statements of the
company notices some discrepancies in the books of the company. Upon discussion with the auditor of
the company, the bank manager requested for detailed information regarding a few items in the
financial statements. The information is available in the working paper file of the auditor. What should
be the response of the auditor in this regard?
Answer Part I -- Relevant Standards & Laws
▪ Clause (1) of Part I of the Second Schedule to the Chartered Accountants Act, 1949
▪ SA 200 on " Overall Objectives of the Independent Auditor and the Conduct of an Audit in
Accordance with Standards on Auditing"
Part II -- Requirements of Relevant Standards & Laws
➢ Clause (1) of Part I of the Second Schedule
Clause (1) of Part I of the Second Schedule to the Chartered Accountants Act, 1949 states that a
chartered accountant in practice shall be deemed to be guilty of professional misconduct if he
discloses information acquired in the course of his professional engagement to any person other
than his client, without the consent of the client or otherwise than as required by law for the time
being in force.

➢ SA 200 on " Overall Ob Author’s Note
Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with
Standards on Auditing"
SA 200 on " Overall Objectives of the Independent Auditor and the Conduct of an Audit in
Accordance with Standards on Auditing" also reiterates that, "the auditor should respect the
confidentiality of information acquired in the course of his work and should not disclose any such
information to a third party without specific authority or unless there is a legal or professional duty
to disclose".

Part III – Case Discussion
➢ In the instant case, the bank has asked the auditor for detailed information regarding few items in
the financial statements available in his working papers. Having regard to the position stated
earlier, the auditor cannot disclose the information in his possession without specific permission of
the client. As far as working papers are concerned, working papers are the property of the auditor.
The auditor may at his discretion, make portions of or extracts from his working papers available
to his client".
Part IV – Conclusion
➢ Thus, there is no requirement compelling the auditor to divulge information obtained in the course
of audit and included in the working papers to any outside agency except as and when required by
any law.
Author’s Note

# Mistake point
It is very common mistake made by students that they don’t refer relevant SA’s. They only refer the
clauses of professional ethics while solving professional ethics question. Brief of relevant applicable
standards should also by provided by students, because the answers provided by institute also
contains such reference but in an “inconsistent manner”. That’s why only few questions have reference

www.auditguru.in PARAM 19.73 | P a g e