ICAI has issued guidelines for auditors withdrawing from the audit work through mid-term resignation, which includes auditor’s responsibilities and professional obligations to be complied with, specially in the case of listed companies.
In 2018, there have been number of mid-term resignations by auditors particularly auditors of listed companies. The matter being a concern for various stakeholders, ICAI decided to examine the reasons and circumstances leading to resignation of auditors and a Group was constituted, which considered the matter and a need was felt to create further awareness among the members about the circumstances and responsibility of auditors under the framework of Standards on Auditing in such circumstances through issuing appropriate guidance.
The task of developing guidance for the members was entrusted to the Auditing and Assurance Standards Board (AASB) of ICAI, which has come out with this “Implementation Guide on Resignation/Withdrawal from an Engagement to Perform Audit of Financial Statements”. The Implementation Guide deals with various aspects of auditors’ resignation in simple and easy to understand language.
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.
Because of the variety of the circumstances that may arise, it is not possible to describe definitively when withdrawal from an engagement is appropriate. The SAs envisage certain situations which require the auditor to consider withdrawal from the engagement to audit financial statements.
A firm is also required to comply with the requirements of SQC 1 in performing audits, reviews of historical financial information and for other assurance and related services engagements. An auditor can resign from the statutory audit of a company while evaluating the engagement and/or client acceptance as envisaged in SQC 1.
The Code of Ethics also requires an auditor to consider resigning from an engagement when it is concluded that a requirement established by the Code of Ethics cannot be met and the resignation is the only available alternative.
It is expected that an auditor may withdraw/ resign from the engagement in circumstances that are covered by the professional pronouncements referred to in paragraph 8 to 10 above. A list of those circumstances is given as Appendix to this Implementation Guide.