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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Fraud and error

During an audit, Senior Ravi suspects that a client's accountant is laundering proceeds of fraud through the company's accounts. Ravi mentions his suspicion to the accountant to ask for an explanation. Which statement best describes the ethical and legal concern?

Ravi should report his suspicion internally to the firm's money laundering reporting officer instead of questioning the suspect, because alerting the person risks tipping off, an offence in many jurisdictions. Deleting working papers or waiting until the report is signed would be improper and unhelpful.

  1. ARavi risks tipping off, so he should report suspicions internally to the firm's money laundering reporting officer rather than alerting the suspectCorrect
  2. BThere is no concern, because inquiry of the accountant is always required
  3. CRavi should delete working papers to avoid any record of the suspicion
  4. DRavi should wait until the audit report is signed before raising it

Explanation

Alerting a suspect may constitute tipping off, which is an offence in many jurisdictions, and compromises investigation. The proper route is internal reporting to the firm's reporting officer, who decides on external reports. Destroying documentation is improper, and delaying is not appropriate.

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