I have a doubt regarding communication with previous auditor in PE. Suppose an auditor comes to know about a fraud in a company which had the higher authorities involved and the final decision that the auditor takes is to withdraw from engt (SA 240) after informing about it as per 143(11). Now, when the company goes to another auditor and communication happens between the outgoing and incoming auditor, the outgoing auditor should not disclose about the fraud in the company to the incoming auditor( this is as per clause 1 of part 1 of second schedule). My doubt here is that if the outgoing auditor does not have to disclose about the fraud then what reason will he give to the incoming auditor in their communication as to why he withdrew? The incoming auditor has to see whether the reply is appropriate or not and then only accept the audit. So now, as disclosure of fraud is not allowed what will be the reason given by outgoing auditor to the incoming auditor in their communication?

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I have a doubt regarding communication with previous auditor in PE. Suppose an auditor comes to know about a fraud in a company which had the higher authorities involved and the final decision that the auditor takes is to withdraw from engt (SA 240) after informing about it as per 143(11). Now, when the company goes to another auditor and communication happens between the outgoing and incoming auditor, the outgoing auditor should not disclose about the fraud in the company to the incoming auditor( this is as per clause 1 of part 1 of second schedule). My doubt here is that if the outgoing auditor does not have to disclose about the fraud then what reason will he give to the incoming auditor in their communication as to why he withdrew? The incoming auditor has to see whether the reply is appropriate or not and then only accept the audit. So now, as disclosure of fraud is not allowed what will be the reason given by outgoing auditor to the incoming auditor in their communication?

Questions › Category: CA-Final Prof Ethics › I have a doubt regarding communication with previous auditor in PE. Suppose an auditor comes to know about a fraud in a company which had the higher authorities involved and the final decision that the auditor takes is to withdraw from engt (SA 240) after informing about it as per 143(11). Now, when the company goes to another auditor and communication happens between the outgoing and incoming auditor, the outgoing auditor should not disclose about the fraud in the company to the incoming auditor( this is as per clause 1 of part 1 of second schedule). My doubt here is that if the outgoing auditor does not have to disclose about the fraud then what reason will he give to the incoming auditor in their communication as to why he withdrew? The incoming auditor has to see whether the reply is appropriate or not and then only accept the audit. So now, as disclosure of fraud is not allowed what will be the reason given by outgoing auditor to the incoming auditor in their communication?

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audit Staff asked 7 years ago

3 Answers

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Ravi Staff answered 7 years ago

Hello Pranali
Outgoing auditor can inform that there were circumstances in which we had to withdraw and of client permits then he can disclose details.
Incoming auditor will ask client to give permission so that he can decide whether to accept such assignments.
So all incoming auditors will enforce client to give permission for disclosure.

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Ravi Staff answered 7 years ago

In same manner he may inform that there were circumstances in which he was going to modify opinion and of client permits he can give details.

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Ravi Staff answered 7 years ago