a) ABC and Company, Chartered Accountants, have been requested to give their consent for appointment as the auditor of Sindh Limited (SL), in place of XYZ and Company, Chartered Accountants. The matter of appointment of ABC and Company is to be placed in the annual general meeting of SL.

Required:

What would be the retiring auditors responsibilities with respect to the above and the responsibility of ABC and Company, in case the retiring auditor does not fulfil its responsibility?

b) Assume that in (a) above XYZ and Company had qualified the previous years audit report because it was unable to physically verify the factory building and to observe physical inventory count, due to law and order situation. However, during the course of current years audit, ABC and Company was able to observe the physical inventory count and also carry out physical verification of the factory building as the law and order situation has improved.

Required:

Discuss the matters which you would consider in the above situation and the possible impact thereof on the audit report.