Studio Ltd. appointed AB & Associates and CD & Co. as joint auditors for conducting the audit for the year ending on 31st March 2024. During…

Responsibility and Co-ordination among Joint Auditors: As per SA 299, "Joint Audit of Financial Statements”, where joint auditors are appointed, they should, by mutual discussion, divide the audit work among themselves. The division of the work would usually be in terms of audit identifiable units or specified area. In some cases, due to the nature of the business entity under audit, such a division of the work may not be possible. In such situations, the division of the work may be with reference to items of assets or liabilities or income or expenditure or with reference to period of time. The division of the work among joint auditors as well as the areas of work to be covered by all of them should be adequately documented and preferably communicated to the entity. In respect of the audit work divided among the joint auditors, each joint auditor is responsible only for the work allocated to him, whether or not he has prepared a separate audit of the work performed by him. On the other hand all the joint auditors are jointly and severally responsible (i) The audit work which is not divided among the joint auditors and is carried out by all joint auditors; (ii) Decisions taken by all the joint auditors under audit planning phase concerning the nature, timing and extant of the audit procedure to be performed by each of the auditor; (iii) Matters which are bought to the notice of the joint auditors by any one of them and on which there is an agreement among the joint auditors; (iv) Examining that the financial statements of the entity comply with the requirements of the relevant statute; (v) Presentation and disclosure of financial statements as required by the applicable financial reporting framework; (vi) Ensuring that the audit report complies with the requirements of the relevant statutes, the applicable Standards on Auditing and the other relevant pronouncements issued by ICAI; The joint auditors shall also discuss and document the nature, timing, and the extent of the audit procedures for common and specific allotted areas of audit to be performed by each of the joint auditors and the same shall be communicated to those charged with governance. After identification and allocation of work among the joint auditors, the work allocation document shall be signed by all the joint auditors and the same shall be communicated to those charged with governance of the entity. Hence, in respect of audit work divided among the joint auditors, each joint auditor shall be responsible only for the work allocated to such joint auditor including proper execution of the audit procedures. In the instant case, Studio Ltd. appointed two CA Firms AB & Associates and CD & Co. as joint auditors for conducting audit. As observed during the course of audit that there is a significant understatement in the value of trade receivable and valuation of trade receivable work was looked after by AB & Associates. In view of SA 299, AB & Associate will be held responsible for the same as trade receivable valuation work was looked after by AB & Associates only. Further, there is violation of SA 299 as the division of work has not been documented.