ACCA Strategic Professional · Advanced Audit and Assurance (International) · Laws and regulations
During the audit of Orion Bank Ltd, the auditor finds likely non-compliance with a banking regulation by a senior director. Management refuses to take remedial action and the matter is material. Law in the jurisdiction contains no explicit duty to report to authorities, and the Code's confidentiality duty applies. Following ISA 250 (Revised) and the IESBA Code, which course of action is most appropriate?
The auditor should consider the effect on the audit opinion and whether to report externally, taking legal advice about the confidentiality duty and whether disclosure is appropriate in the public interest. Neither automatic silence nor immediate reporting without that evaluation is appropriate.
- ARemain silent because confidentiality always overrides any reporting
- BConsider the implications for the audit opinion and whether to report externally, taking legal advice on the duty of confidentiality and possible disclosureCorrect
- CReport to the regulator immediately without considering confidentiality or legal advice
- DResign without communicating with anyone
Explanation
ISA 250 requires the auditor to consider the effect on the opinion and whether to report to an authority where no legal duty exists, noting that confidentiality may restrict disclosure. The IESBA Code allows disclosure in the public interest after considering factors such as legal advice. Silence, hasty reporting and silent resignation are all inappropriate.
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