Before a Chartered Accountant accepts appointment as statutory auditor in place of another auditor, ICAI's Code of Ethics requires a written communication with the previous auditor. In practice everyone calls the exchange an "NOC from previous auditor", although what the Code actually asks for is a communication seeking any professional objection - the outgoing auditor's reply (or silence after a reasonable time) is what clears the way.
This post covers when the communication is needed, what it must say, the timing that keeps you on the right side of the Code, and a format you can generate for every new engagement.
When the communication is required
- Every change of statutory auditor of a company, whether the previous auditor resigned, was removed, or simply was not re-appointed.
- Tax audit and other attest engagements where a member previously held the assignment - the Code's clause on communication applies to attest work generally, not only company audits.
- It is required before accepting the appointment, not after. Accepting first and writing later is a professional-misconduct risk under Clause 8 of Part I of the First Schedule to the Chartered Accountants Act, 1949.
The communication is not required for a fresh engagement where no auditor existed earlier - a newly incorporated company, for instance.
What the letter must contain
A compliant communication is short. It should state:
- Who approached you - the company or entity, and for which financial year.
- The nature of the assignment - statutory audit, tax audit, or another attest function.
- The request - whether there is any professional or other reason why you should not accept the appointment.
- A reasonable time for the reply, after which you will presume there is no objection.
Keep it factual and courteous. The letter is a professional courtesy between members, not a demand.
Sending it correctly
The Code expects the communication to be sent in a way that proves delivery: registered post with acknowledgement due, or hand delivery against acknowledgement. Email alone is not treated as sufficient proof; if you use email, follow it with a physical copy. Keep the acknowledgement in the engagement file - it is the evidence that you complied.
Wait a reasonable period (7 to 15 days is common practice) before proceeding. If the previous auditor raises an objection - unpaid fees are the classic one - assess it before accepting; undisputed audit fees outstanding to the outgoing auditor are a recognised ground for declining.
The format
DocMold's Template Library includes a NOC from Previous Auditor format that follows the structure above. The previous auditor's name and address and the financial year are typed once; the client company name comes from your Client Master, and your firm's name, address and signatory block fill in from your profile. Generate it as Word or PDF, print, sign and dispatch.
A typical generated letter reads:
We have been approached by [Client Company] for appointment as their statutory auditors for the financial year [FY] in your place. In accordance with the requirements of the Chartered Accountants Act, 1949 and the Code of Ethics, we write to enquire whether there is any professional or other reason why we should not accept the appointment. If we do not hear from you within a reasonable time, we shall presume that there is no objection to our accepting the appointment.
A practical checklist
- Communication sent before acceptance, by a method that proves delivery
- Acknowledgement filed with the engagement letter
- Reasonable waiting period observed and documented
- Any objection assessed and the decision recorded
- Appointment formalities (ADT-1 for companies) completed after clearance
Pair the NOC with an Audit Engagement Letter and, for companies, the Appointment Letter of Auditor issued by the client - all three are in the library and generate from the same client record.