ACCA Strategic Professional · Advanced Audit and Assurance (International) · Code of Ethics for Professional Accountants
Brennan & Partners audits Orchid Holdings, a listed company. The audit senior, Kofi, discovers that the CFO has been recognising fictitious sales to meet bank covenants. Kofi raises the issue with the engagement partner, who tells him to drop it because the fee is large and the client is important. Kofi believes the matter is material. Which course of action best reflects the Code's ethical requirements for Kofi, assuming the firm's internal escalation process is available?
Kofi should document his concerns and use the firm's internal consultation and escalation process, seeking advice from an ethics partner, while respecting confidentiality and considering legal protections. Following the partner would breach integrity, and leaking to the press or informing the CFO are not appropriate ways of resolving the conflict.
- AFollow the partner's instruction, since the partner holds ultimate responsibility for the audit
- BResolve the matter by anonymously leaking the details to a journalist
- CUse the firm's internal consultation and escalation process, document his concern, and seek advice from an ethics partner or the firm's designated contact, while remaining alert to confidentiality and legal protectionsCorrect
- DImmediately report to the CFO that the partner is failing to address the issue
Explanation
The Code requires a professional accountant to act with integrity and not be associated with misleading information, and it expects professionals to follow the firm's escalation policies when a conflict arises. Kofi should document his concerns and escalate within the firm, taking legal advice if needed. Obeying the partner would breach integrity. Leaking to the press breaches confidentiality without an appropriate channel. Telling the CFO is inappropriate and does not resolve the conflict.
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