SA 299 - Responsibilities of Joint Auditors Effective from April 1, 1996.
Joint Auditors: Practice of appointing more than one auditor to conduct the audit of large entities. Such auditors, known as Joint Auditors. Joint Auditors conduct audit jointly & report on the financial Statements. Example: Reliance Industries Limited has three auditors namely Chaturvedi & Shah, Deloitte Haskins & Sells LLP, Rajendra & Co. These three audit firms conduct audit of Reliance Industries Limited. So Above three audit firms are known as Joint Auditors.
The concept of Joint audit is very common in Nationalized banks. The standard does not deal with the relationship between a principal auditor who is appointed to report on the financial statements of an entity and another auditor who is appointed to report on the financial statements of one or more divisions or branches included in the financial statements of the entity. e.g. Relationship between the Principal auditor and Branch auditor.
The concept of Joint Auditors are divided into four topics.
I. Division of work
III. Relationship Among Joint Auditors
IV. Reporting Responsibilities
I. Division of work: The auditors should divide their area of responsibilities by mutual discussion. The areas could be divided either in terms of identifiable locations or units of the company or it may be divided based on divisions. Eg., ITC company has Several Business Divisions, cigarettes, other FMCG products, Hotels, Paper Board and Packaging etc., So division of work can be based on these business divisions. In some cases, due to the nature of the business of the entity under audit, such a division of work may not be possible. In such situations, the division of work may be with reference to items of assets or liabilities or income or expenditure or with reference to periods of time. Certain areas of work, owing to their importance or owing to the nature of the work involved, would often not be divided and would be covered by all the joint auditors.
Ex. Closing Stock. Work divided amongst the joint auditors must be documented, and communicated to the client.
II. Coordination: The Joint Auditors must Co-ordinate amongst themselves. If any audit information is available with one Joint Auditor regarding area of responsibility of other joint auditor, then he should communicate such information to the other joint auditor as soon as possible before finalization of audit. if communication is done after finalization of audit then the other Joint Auditor will not be responsible in respect of such information.
III. Responsibilities of Joint Auditors: Each Joint Auditor is responsible only for the work allocated to him. On the other hand, all the joint auditors are jointly and severally responsible -
1. In respect of Undivided work
2. Nature, timing or extend of audit procedures. Every auditor is responsible for determining the nature, timing or extend of audit procedures pertaining to his area. However consider a case where Inventories was audited by Joint auditor and all the joint auditors were mutually decided the audit procedures to be followed for inventory for that particular joint auditor. Now the other joint auditors will be responsible only for the judgment of the audit procedures relating to inventory. How the audit procedures have been implemented will be responsibility only of that particular joint auditor who has been allocated inventory.
3. All the joint auditors responsible for compliance with disclosure requirement. ie. Notes on accounts
4. Audit report should be as per the statutory requirements. This is the common responsibility of every joint auditor.
5. Any significant matter which was uncovered by a particular joint auditor and which was made known to all the other joint auditors will be a common responsibility of all of them.
Joint Auditors usually entitled to assume the following:
a. That the other joint auditors are competent to audit their respective area
b. Not necessary to review the work done by the other joint auditor
c. Joint auditor can very well rely on the other joint auditor that if he comes across any information relating to his area he will definitely shares it to him urgently on a timely basis.
IV. Reporting responsibilities: Normally, the Joint auditors are able to arrive at an agreed report. If the joint auditors have different audit opinions, in such a case joint auditors having different opinion will give different audit reports.
e.g. There are 3 Joint Auditors A, B & C. A&B want to give a clean opinion, whereas C wants to express a qualified opinion. In such a case, A & B will prepare a single audit report and C will prepare a separate audit report. Hence, there are total 2 audit reports available.
So in the Annual Report both the audit reports will be published & circulated to the shareholders.