Implementation guide on resignation of Auditor by ICAI

Posted on    01 December 2018

Implementation Guide on Resignation/ Withdrawal from an Engagement to Perform Audit of Financial Statements


1. The objective of this Implementation Guide is to provide guidance to auditors in case of resignation/ withdrawal from an engagement to perform audit of financial statements.

2. The financial statements of an entity are prepared by the management of the entity to provide information about the financial position, financial performance and cash flows of the entity that is useful to a wide range of users in making economic decisions. The purpose of an audit is to enhance the degree of confidence of intended users in the financial statements. This is achieved by the expression of an opinion by the auditor on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework and are free from material misstatement whether due to fraud or error. An audit of financial statements is intended to provide credibility to the financial statements through the report issued by an auditor.

3. The auditor needs to comply with the Standard on Quality Control (SQC) 1 - “Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements”, Standards on Auditing (SAs), the Code of Ethics and other relevant pronouncements issued by the ICAI.

4. An audit of financial statements is based on the ‘premise’1 relating to the responsibilities of management and, where appropriate, those charged with governance, on which an audit is conducted. According to this premise, the management and, where appropriate, those charged with governance have certain responsibilities that are fundamental to the conduct of an audit in accordance with SAs. These responsibilities, inter alia, include providing the auditor with: (a) All information, such as records and documentation, and other matters that are relevant to the preparation and presentation of the financial statements; (b) Any additional information that the auditor may request from management and, where appropriate, those charged with governance; and (c) Unrestricted access to those within the entity from whom the auditor determines it necessary to obtain audit evidence.

5. Section 143 of the Companies Act, 2013 (‘the Act’) provides the auditor with wide powers to discharge the duties assigned under the Act. These include right of access at all times to the books of account and vouchers of the Company and entitlement to require from the officers of the Company such information and explanation as he may consider necessary for the performance of his duties as auditor. Further, the Act also specifies the manner of appointment of auditor and the procedures to be followed in case a company wishes to remove an auditor before the expiry of his term. The Act also permits the auditor to resign from the statutory position of auditor by following the procedures laid down in the Act and the Rules issued thereunder.

6. The premise relating to the responsibilities of management and those charged with governance and the powers of the auditors specified in section 143 of the Act and several other provisions under the Act are directed towards ensuring that the auditor is able to perform the audit in accordance with the Standards on Auditing. An auditor is also permitted as per the Standards on Auditing to withdraw from an engagement to audit financial statements.

7. This Implementation Guide provides guidance about circumstances leading to withdrawal/resignation from an existing engagement, auditor’s responsibilities and professional obligations to be complied with by an auditor in resigning or withdrawing from an engagement to audit financial statements.

To know more in details, find the enclosed attachment

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