Page 387 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

Front of card: Council members, Regional Council members, and Branch Committee members should list their
respective addresses of ICAI HO, Regional Office, Branch Office along with respective telephone numbers, fax,
and email and also personal telephone number and email.
Back of card: Members can opt to print either their home or office address and phone/fax number. Firm's name
should not be included.

Note: Some Concepts & Clarification are covered with Council guidelines & recent decisions of Ethical Standard

Board given at the end of the Chapter

(CNO-PE.1220) CLAUSE 8 Bare Text: -
Clause (8) 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.
Rationale:
Courtesy & Reason: The requirement for a new accountant to communicate with the existing one is not solely
based on professional courtesy. It provides an opportunity for the existing accountant to understand the reasons
for the change and safeguard their interests, the public's legitimate interests, and their own independence.
Client's Right: Every client has the inherent right to choose their accountant and can change them subject to
statutory requirements, especially in the case of limited companies. The reasons for the change could be
numerous, including a change of business venue, retirement or death of the handling partner, personality clashes,
or client dissatisfaction.
Reasons for not Accepting Audit
1.Professional Reasons: The professional reasons for not accepting an audit include non-compliance with
Sections 139 and 140 of the Companies Act, 2013, non-payment of undisputed audit fees, and issuance of a
qualified report. Accepting an audit under the first two conditions would constitute professional misconduct.
2A. Payment of Undisputed Audit Fees: If the previous auditor is unavailable to accept payment of undisputed
audit fees, the incoming auditor may advise the client to purchase a Demand Draft equivalent to the fees and
verify the same before accepting the audit.
2B. Undisputed Audit Fee: The Council General Guidelines, 2008 defines "undisputed audit fee" as the
provision for audit fee in accounts signed by both the auditee and the auditor, along with other expenses incurred
by the auditor in connection with the audit.
3. Qualified Report: An incoming auditor may accept an audit with a qualified report if they believe the retiring
auditor's attitude was unjustified. However, if the retiring auditor had valid reasons for qualifying the report, the
incoming auditor should refuse the audit.
Change Procedure: When a prospective client wishes to change auditors, the incoming auditor should confirm
whether the retiring auditor has been informed. If not, the incoming auditor should inquire about the reasons
for the change and & it would be healthy practice to refuse the audit if no valid reason is provided. If he decides
to accept the audit, he should address a communication to the retiring auditor.
Non-Response from Retiring Auditor: If the retiring auditor does not respond to the incoming auditor's
communication, the incoming auditor can proceed with the appointment after waiting a reasonable time for a
reply.
Positive proof of delivery.
Certificate of Posting: The Council believes that merely posting a letter "under certificate of posting" is
insufficient to establish communication with the retiring auditor. There must be evidence that the letter has
reached the intended recipient.
Case Law: The Council's view is confirmed by the Rajasthan High Court in J.S. Bhati v.s. The Council of the
Institute of Chartered Accountants of India. The court stated that obtaining a certificate of posting does not fulfil
the requirements of Clause (8) of Schedule I, as it does not provide positive proof of delivery.

www.auditguru.in 19.31