ACCA Strategic Professional · Advanced Audit and Assurance (International) · Laws and regulations
Brindle Foods' auditor suspects the finance director has deliberately breached environmental regulations, leading to potentially significant fines that are not provided for. Management refuses to act and the board is dominated by the finance director. The auditor wonders whether reporting to an external authority is permitted despite the duty of confidentiality. Which statement is correct under the IESBA Code and ISA 250 (Revised)?
The auditor must consider whether law requires or permits disclosure, and where it does not, whether the Code's guidance on responding to non-compliance supports disclosure in the public interest, usually after taking legal advice. Confidentiality is not absolute, but there is no automatic duty to report that overrides local law or requires client consent.
- AConfidentiality is absolute, so the auditor can never disclose to an external authority
- BThe auditor must always report to the authority because the Code overrides local law
- CThe auditor should consider whether disclosure is required or permitted by law, and if no legal duty exists, whether the Code's guidance on responding to non-compliance supports disclosure in the public interest, taking legal advice if neededCorrect
- DThe auditor may disclose only after obtaining the client's written consent
Explanation
The IESBA Code and ISA 250 (Revised) recognise that confidentiality may be overridden where law requires or permits disclosure, and the auditor considers whether disclosure is appropriate in the public interest. Legal advice is typically sought. Confidentiality is therefore not absolute, but the Code does not impose a blanket duty to report that overrides local law, and client consent is not a precondition.
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