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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Laws and regulations

Auditor Priya Nair of Hale & Partners finds that Orbis Pharma's board is deliberately concealing a material breach of licensing law. After raising it with those charged with governance, no remedial action is taken, and the breach could cause substantial harm to investors. Which course of action is most consistent with ISA 250 (Revised) and the IESBA Code?

The auditor should evaluate the effect on the audit report and modify the opinion if the effects are material or evidence is limited. The auditor should also consider withdrawal where permitted and whether to report to an appropriate authority, taking legal advice, because confidentiality does not bar disclosure in the public interest.

  1. AConsider the effect on the audit report, including a qualified or adverse opinion or disclaimer if the effects are material or evidence is limited, and consider whether to report to an appropriate authority, taking legal advice and, where relevant, resigningCorrect
  2. BContinue the audit and issue an unmodified opinion because the breach is a legal matter, not an accounting matter
  3. CPublish the details in the media to warn investors
  4. DInform only the audit committee and take no further steps, as the Code prohibits any external disclosure

Explanation

Where management does not remediate, the auditor evaluates the effect on the audit report (modification if the effects are material or evidence is limited), considers whether to withdraw where permitted, and considers reporting to an authority, often with legal advice. An unmodified opinion ignores the material effects. Publishing to the media is not an appropriate authority. The Code does not prohibit external disclosure.

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