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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Laws and regulations

During the audit of Kestrel Foods Ltd, an audit senior notices payments to a government official that may breach anti-bribery law. Under ISA 250 (Revised), what is the auditor's first required step on becoming aware of information about suspected non-compliance?

The auditor should first understand the nature of the suspected act and its circumstances, then discuss it with management and, where appropriate, those charged with governance. Direct reporting or withdrawal comes later, after evaluating the facts and the implications for the audit.

  1. AReport the matter immediately to the regulator without telling management
  2. BObtain an understanding of the nature of the act and the circumstances, and discuss it with management and those charged with governanceCorrect
  3. CWithdraw from the engagement before making any enquiries
  4. DIgnore it because bribery law has only an indirect effect on the financial statements

Explanation

ISA 250 requires the auditor, on becoming aware of information about non-compliance or suspected non-compliance, to obtain an understanding of the act and circumstances and to discuss the matter with management and, where appropriate, those charged with governance. Immediate external reporting or withdrawal would skip the evaluation steps. Laws with an indirect effect still require audit procedures to identify non-compliance.

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