ACCA Strategic Professional · Advanced Audit and Assurance (International) · Code of Ethics for Professional Accountants
Bright & Lowe, auditors of Orion Ltd, discover that Orion's finance director has been paying inducements to a foreign official, which may breach laws. The engagement partner has raised it with the finance director, who denies it. Management and those charged with governance take no action. Which response best follows the Code's approach to non-compliance with laws and regulations (NOCLAR) for an auditor?
The auditor should evaluate the response of management and those charged with governance, then decide whether further action is needed, such as disclosure to an appropriate authority or withdrawal, taking account of confidentiality duties and legal advice. Inaction or press disclosure would not follow the Code.
- AConsider the response of management and those charged with governance, assess whether further action is needed including disclosure to an appropriate authority or withdrawal, and consider the legal duty of confidentiality and any legal adviceCorrect
- BStop work and do nothing further because the finance director denied the matter
- CImmediately publicise the matter in the press to protect the public interest
- DAssume the issue is immaterial and ignore it because the fraud is not within the financial statements
Explanation
Under the Code the auditor assesses the adequacy of the response by management and those charged with governance, then determines whether further action is needed, which may include disclosure to an appropriate authority (taking account of confidentiality and law), or withdrawing. Press publicity or inaction is inappropriate, and a denial does not resolve the concern.
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