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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Money laundering

An audit firm's MLRO has submitted a suspicious activity report about a client, Dunmore Ltd, and the audit team must continue planning the audit. The audit manager asks the junior why the client cannot be told about the report. Which statement best explains the restriction?

The restriction exists because tipping off is an offence. Telling the client about a report, or an investigation, may prejudice the authorities' inquiries. It is not an independence matter or a condition of the report's validity, so the firm must manage communications with the client carefully.

  1. ATipping off is an offence where disclosure could prejudice a money laundering investigationCorrect
  2. BAuditor confidentiality prevents the firm from ever communicating with the client about suspicions
  3. CThe report is only valid if the client is unaware of it, otherwise it must be withdrawn
  4. DTelling the client would breach independence under the IESBA Code

Explanation

Disclosing that a report has been made, or that an investigation is under way, in a way likely to prejudice it is tipping off, which is an offence. The restriction is not about independence or validity of the report. Confidentiality is not an absolute ban on communication but is overridden by legal reporting duties.

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