Enquiry:

We are a firm of chartered Accountant and this letter aims at requiring a professional advice regarding the following situation:

Our firm has been appointed as auditors of the company and as per the requirements of code of ethics, a professional clearance letter has been sent to previous auditor. However, no response is received from previous auditor’.

Based on the above situation, kindly guide us the procedures we are required to perform if there is no response from previous auditor on this matter despite a reminder has also been sent to them.

Opinion:

We would like to draw your attention to the following paragraphs of the ICAP Code of Ethics for Chartered Accountants: (underline is ours)

210.16     A chartered accountant in practice will ordinarily need to obtain the client’s permission, preferably in writing, to initiate discussion with an existing accountant. Once that permission is obtained, the existing accountant should comply with relevant legal and other regulations governing such requests. The existing accountant should promptly transfer to the new chartered accountant in practice all books and papers of the client, which are or may be held after the change in appointment has been effected and should advise the client accordingly, unless he has a legal right to withhold them. Where the existing accountant provides information, it should be provided honestly and unambiguously. If the proposed accountant is unable to communicate with the existing accountant, the proposed accountant should try to obtain information about any possible threats by other means such as through inquiries of third parties or background investigations on senior management or those charged with governance of the client.

210.17     Where the threats cannot be eliminated or reduced to an acceptable level through the application of safeguards, a chartered accountant in practice should, unless there is satisfaction as to necessary facts by other means, decline the engagement.

Conclusion:

The Committee emphasize that it is a professional and moral obligation for a Chartered Accountant, especially one in practice, to respond to communication from other Chartered Accountants. However, in case such a response is not forthcoming, a Chartered Accountant should take account of section 210.16 and 210.17 referred above.

(Nov 08, 2013)