(a) Rights on dismissal
The only way that directors of a company may dismiss the auditors is if they are also majority shareholders and they propose a change in auditor. The rights of an auditor upon removal are typically as follows:

• The auditor has the right to receive a copy of the notice requesting that the existing auditor be removed. This notice must reach the company before the meeting at which the removal of the auditor is to be discussed.
• The auditor has the right to make a written statement to the members on matters concerning his removal, and the company must either:
  • send this statement out with the notice of the meeting where the resolution is proposed to remove the auditor;
  • send the statement out separately; or
  • have the written statement read out at the meeting.
• The auditor has the right to attend and speak at the meeting on matters that relate to his removal or dismissal.

(b) Reply to letter
Reid & Co
Chartered Accountants
76 Liberty Avenue
Kumasi

Samson & Co
Chartered Accountants
17 Cedar Lane
Kumasi
15 December 20X8

Dear Sirs
We refer to your letter regarding your proposed appointment as auditors of Jenson plc in respect of this matter we would draw your attention to the following matters.
We have received verbal information from the directors of the company that they wish to remove us from office over a disagreement concerning the accounting treatment of obsolete inventory. We issued a qualified audit opinion, which we consider we were justified in doing, on this matter.
The directors also informed us that they would ask a local firm to accept appointment.
In view of the above comments, we have reservations concerning the integrity of the directors of this company.
If you require any further information, please contact us again so that a meeting can be arranged.
Yours faithfully
E. Finch, Partner

(c) Factors to consider before accepting appointment
The nominee auditors should be aware of the attempted manipulation on the part of the directors. If the new auditors feel that they will not be able to act within the IESBA International Code of Ethics for Professional Accountants, then they should not accept the appointment.
The auditors should ensure that the Code guidelines on fee income are observed. Jenson plc should not represent more than 15 per cent of the gross practice fee income.
Other ethical matters also need to be considered. It should be ensured that there are no personal relationships between auditor and client that are restricted by the Code.

(d) Ethical implications for nominee auditor
The new auditor must be and be seen to be independent.
In this particular case, care should be taken that the directors do not attempt to influence the audit opinion.
The new auditors must communicate with the outgoing auditors before accepting appointment. Permission will need to be sought from Jenson plc before making such communication and if permission is refused the new auditors cannot accept the appointment.
The outgoing auditors will also need permission from Jenson plc before they can share any matters that they feel should be brought to the attention of the new auditors before responding to any request for information. If permission is refused the new auditors must carefully consider whether to accept the appointment.
The new auditors should also ensure that they can cope with a client the size of Jenson plc and that it is the sort of client that will ‘fit’ with their current portfolio.