PO & Associates, a firm of Chartered Accountants, having CA. P and CA. O as partners, is based at Chennai. PO & Associates are appointed to…

CA Final · Advanced Auditing, Assurance and Professional Ethics · MTP · May 2026
PO & Associates, a firm of Chartered Accountants, having CA. P and CA. O as partners, is based at Chennai. PO & Associates are appointed to conduct statutory audit of Ring Ltd. Ring Ltd. is required to appoint an internal auditor as per statutory provisions given in the Companies Act, 2013 and appointed CA. Tom as its internal auditor. PO & Associates asked CA. Tom to provide direct assistance to them regarding evaluating significant accounting estimates by the management and assessing the risk of material misstatements. He also seeks his direct assistance in assembling the information necessary to resolve exceptions in confirmation responses with respect to external confirmation requests and evaluation of the results of external confirmation procedures. CA. P accepted his appointment as tax auditor of a firm under section 44AB, of the Income-tax Act, and commenced the tax audit within two days of appointment since the client was in a hurry to file Return of Income before the due date. After commencing the audit, CA. P realised his mistake in accepting this tax audit without sending any communication to the previous tax auditor. In order to rectify his mistake, before signing the tax audit report, he sent a registered post to the previous auditor and obtained the postal acknowledgement. CA. O provides management consultancy and other services to its clients. CA. O was also awarded 'Best Speaker of the year' in recognition of his contribution from the Institute. Later on, CA. O posted his framed photograph on his website wherein he was receiving the said award from the Institute. Upon hearing about the efficient services provided by PO & Associates Chartered accountants, they were approached by PQR Cooperative Society to act as their statutory auditor for the upcoming financial years. The firm agreed to the offer and had the following options in mind with respect to the fees to be charged from them: (i) To charge fees as percentage of Net Profits, or (ii) To charge fees of 9,501/-. Based on above facts, answer the following MCQs
(A) As per Clause (8) of Part I of First Schedule to the Chartered Accountants Act, 1949 CA. P will not be held guilty of professional misconduct as he communicated with the previous tax auditor before signing the audit report.
(B) As per Clause (8) of Part I of First Schedule to the Chartered Accountants Act, 1949, CA. P will be held guilty of professional misconduct since he has accepted the tax audit, without first communicating with the previous auditor in writing.
(C) As per Clause (8) of Part I of First Schedule to the Chartered Accountants Act, 1949, CA. P will not be held guilty of professional misconduct since the requirement for communicating with the previous auditor being a chartered accountant in practice would apply to statutory audit only.
(D) As per Clause (8) of Part I of Second Schedule to the Chartered Accountants Act, 1949, CA. P will be held guilty of professional misconduct since he has accepted the tax audit, without first communicating with the previous auditor in writing.

Suggested Answer and Working Notes:

Correct Answer: Option (B)

As per Clause (8) of Part I of First Schedule to the Chartered Accountants Act, 1949, CA. P will be held guilty of professional misconduct since he has accepted the tax audit, without first communicating with the previous auditor in writing.

Topics: Professional Ethics & Liabilities of Auditors, Standard on Auditing (SA), Reporting

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