15.2.03 Requirement to Obtain NOC from the Retiring Cost Auditor


Cost auditor is appointed by the board of directors of the company and thereafter approval from SECP is obtained. Later on cost auditors resign for any reason and board of directors appoint new cost auditor and obtain the approval of SECP. Does new cost auditor require to obtain NOC from the retiring auditors before holding the office? As per understanding the NOC mentioned in the law is required for the financial audit because cost audits can also be carried on by the CA, CMAs.


We wish to draw your attention to the following relevant paragraphs of the ICAP Code of Ethics for Chartered Accountants:

Definition of Existing Accountant

A Chartered Accountant in practice currently holding an audit appointment or carrying out accounting, taxation, consulting or similar professional services for a client.

210.10 A chartered accountant in practice who is asked to replace another chartered accountant in practice, or who is considering tendering for an engagement currently held by another chartered accountant in practice, should determine whether there are any reasons, professional or other, for not accepting the engagement, such as circumstances that threaten compliance with the fundamental principles. For example, there may be a threat to professional competence and due care if a chartered accountant in practice accepts the engagement before knowing all the pertinent facts.

210.11 The significance of the threats should be evaluated. Depending on the nature of the engagement, this may require direct communication with the existing accountant to establish the facts and circumstances behind the proposed change so that the chartered accountant in practice can decide whether it would be appropriate to accept the engagement. For example, the apparent reasons for the change in appointment may not fully reflect the facts and may indicate disagreements with the existing accountant that may influence the decision as to whether to accept the appointment.

Please also refer clause 7 of Part 1 of 1st Schedule of Chartered Accountants Ordinance 1961 which mentions that:

“A Chartered Accountant in practice shall be deemed to be guilty of professional misconduct, if he:

(7)   Accepts a position as auditor previously held by another members of the Institute without first communicating him in writing.”


From the above, we can conclude that it appears to be necessary for a chartered accountant in practice to communicate with the existing accountant carrying out an audit appointment including cost audit.

(January 2010)