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Council Interpretation 302
Communication with Predecessor
Changes in professional appointments
302/1 The purpose of the rule is to protect a potential successor from accepting an appointment before that member has knowledge of the circumstances under which the previous accountant's services were discontinued. Knowledge of these circumstances might well influence that member against accepting the engagement. The recommended procedure outlined below should be followed.
302/2 When a member has been asked by a prospective client to accept an engagement it is recommended that the client be advised that the incumbent should be notified of the proposed change by the client. The member should then inquire of the incumbent whether there are any circumstances that should be taken into account which might influence the member's decision whether or not to accept the appointment. The member should not take up any work on the account until the member has communicated with the incumbent, except that in the client's interest, acceptance of the offered appointment should not be unduly delayed through the failure of the incumbent to reply, if every reasonable effort has been made to communicate with the incumbent.
302/3 The incumbent must respond promptly to a communication of this nature. If there are no circumstances that the member should be made aware of, a simple response to this effect is all that is necessary. If, on the other hand, the incumbent is aware of circumstances that the member should take into account which might influence the decision whether or not to accept the appointment, the incumbent should first consider the question of confidentiality. In cases other than those to which Rule 302.3 applies if it appears that the circumstances cannot be disclosed because of confidentiality, the response to the member should state that there are, in the opinion of the incumbent, circumstances which should be taken into account, but that they cannot be disclosed without the consent of the client.
302/4 If there are circumstances as contemplated by Rule 302.3 the existence of such circumstances should be communicated. However, the response should state that details cannot be disclosed without the consent of the client. The incumbent should state only what he or she believes to be true, and should take care not to make imputations against a client or individuals connected with it which he or she can have no reason for believing to be true. To do otherwise may result in the incumbent being found to have acted maliciously, and therefore exposed to an action for defamation. While circumstances may be matters of public record, the incumbent must still consider whether confidentiality precludes the disclosure of the details to the successor. Where confidentiality is in doubt, or if responding pursuant to Rule 302.3, obtaining legal advice should be considered.
302/5 The successor should also inquire of the incumbent whether there is any ongoing business of which the successor should be aware, in order to ensure that the client's interests are protected. On the part of the incumbent, there must be readiness to cooperate with the successor recognizing that the client's interests are paramount whether or not there are fees owing to the incumbent by the former client.
302/6 Members should be cognizant of the provisions of any federal and provincial legislation, including securities legislation regulating changes in professional appointments or requiring notification of such changes to incumbents.
302/7 The attention of members is drawn to The Corporations Act of Manitoba, in particular, the following provisions of Section 162:
162(7) "No person shall accept an appointment or consent to be appointed as auditor of a corporation if he is replacing an auditor who has resigned or been removed or whose term of office has expired or is about to expire until he had requested and received from that auditor a written statement of the circumstances and the reasons why, in that auditor's opinion, he is to be replaced."
162(8) "Notwithstanding subsection (7), a person otherwise qualified may accept appointment or consent to be appointed as auditor of a corporation if, within 15 days after making the request referred to in that subsection, he does not receive a reply."
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