Can a Practicing CA Accept Audit Assignment when Unpaid Audit Fees is Pending Towards Previous Auditor? ICAI’s FAQs Answers
The Frequently Asked Questions on Ethical Issues is a compilation released by the ICAI TO guide Chartered Accountants when faced with convoluted issues regarding the profession
ICAI – CA Audit fee – CA audit assignment rules – taxscan
ICAI – CA Audit fee – CA audit assignment rules – taxscan
The role of a Chartered Accountant (CA) is critical in ensuring financial transparency and compliance with regulatory standards. From statutory audits to financial advisory services, CAs are expected to uphold the ethical and professional integrity of the profession by engaging in activities as guided by the Institute of Chartered Accountants of India (ICAI).
Matters being so, one ethical dilemma often faced by incoming auditors enlisted for audit is whether they can accept an audit assignment when the previous auditor’s fees remain unpaid.
The ICAI, through its Ethical Standards Board, addresses this issue under Section 53 of the Frequently Asked Questions on Ethical Issues released in February, 2012.
“53. Whether a Chartered Accountant in practice can accept audit in case the audit fee of the previous auditor remains unpaid.
Ans. No, in case the undisputed audit fees for carrying out the statutory audit under the Companies Act, 1956 or various other statutes have not been paid, the incoming auditor should not accept the appointment unless such fees are paid. In respect of other dues, the incoming auditor should in appropriate circumstances use his influence in favour of his predecessor to have the dispute as regards the fees settled.
The Council has taken the view that the provisions of audit fee made in accounts signed by both the auditor and the auditee shall be considered as 'undisputed' audit fees. In this connection, attention of members is invited to the Council General Guidelines, 2008 dated 08.08.2008”
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Before delving into the stance adopted by the ICAI, it is pertinent to define what constitutes "undisputed fees". Undisputed Fees are audit fees that are acknowledged by the client but have remained unpaid without any legitimate dispute between the client and their auditor. If the previous auditor and the client have an unresolved disagreement over fees, the incoming auditor may consider the dispute before deciding to accept the assignment.
According to ICAI, a practicing CA should not accept an audit assignment if the previous auditor’s undisputed statutory audit fees remain unpaid. This applies specifically to statutory audits conducted under the Companies Act, 2013 and other legal statutes. The incoming auditor is expected to exercise professional courtesy by first inquiring about the status of unpaid fees and advising the client to settle the dues.
The rationale behind this guideline is simple: allowing a client to delay or avoid payments to auditors undermines the value of audit services and professional integrity. Accepting an audit under such circumstances could encourage unethical behavior, where clients intentionally switch auditors to evade payment obligations.
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The guideline is just another modus devised by the ICAI to uphold the integrity of the profession and another means where the entire CA professional community looks out for one another through binding guidelines.
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