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ACCA Applied Knowledge · Business and Technology · Fundamental principles of ethical behaviour

Dana, an accountant, discovers that her manager has been overstating inventory to meet a bank covenant. She raises it with her manager, then with the audit committee chair, and nothing changes. She documents all discussions. Which statement is correct regarding her position?

Dana should consider obtaining legal advice and whether disclosure is permitted or required by law. Confidentiality is not absolute, and further options such as external reporting or resignation remain. Her documentation is good practice and supports her position if the matter escalates.

  1. ADocumenting discussions is unnecessary as it adds no protection
  2. BHer duty of confidentiality means she may never disclose externally under any circumstances
  3. CShe has no further options because the audit committee has failed
  4. DShe should consider whether legal advice is needed and whether disclosure is permitted or required by law, before deciding on further actionCorrect

Explanation

Confidentiality is not absolute; disclosure may be permitted or required by law or in the public interest, so legal advice is sensible. Documentation is good practice as it protects the accountant and records the steps taken. The other options wrongly claim absolute confidentiality or that nothing more can be done.

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