China and Chong, accountants, were employed for several years by Bulls Co. Ltd t

Question

China and Chong, accountants, were employed for several years by Bulls Co. Ltd to make annual audits. As a result of a change in control, in company discontinued the engagement of Chin and Chong and retained another firm of accountants. Bulls Co. thereupon demanded that Chin and Chong surrender all working papers they had prepared in undertaking audits for the company. Required: Chin and Chong refused on the grounds that the working papers were their property. The company brought legal action to recover the working papers. Should it succeed? State briefly what the law is, in general, as to ownership of auditors’ working papers. (5 marks)

Explanation / Answer

No. Bulls Company Ltd should not succeed. AU section 339, Audit documentation is the property of the auditor, and some states recognize this right of ownership in their statutes.

Now what is Audit documents ?

Audit documentation is the record of audit procedures performed by teh auditor(s), relevant audit evidence obtained during the audit, and consequently conclusion made. Audit documentation, also known as working papers or workpapers, may be recorded on paper or in form of electronic or other media as deemed fit by the Auditor(s).

As per para 31 of the section 339, The auditor may make available to the auditee at the auditor's discretion, copies of the audit documentation, provided such disclosure does not undermine the independence or the validity of the audit process.

Hence Bulls Company can ask for copies of audit papers/audit documents, but can not demand the custody or ownership of the working papers.

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