ACCA Strategic Professional · Advanced Audit and Assurance (International) · Money laundering
Harlan & Partners' MLRO receives an internal report that an audit client, Dunmore Ltd, may have received proceeds of tax evasion. The MLRO concludes there are reasonable grounds for suspicion and makes an external report. The engagement partner wants to continue the audit and asks whether to proceed with signing the report, and a client asks why a transaction was delayed. Which course of action is most appropriate?
The firm should take guidance from the MLRO on consent and timing, avoid tipping off the client, and consider the effect on the audit and the ethical position, including whether to continue. Informing the client, giving reasons for withdrawal, or destroying the report would be improper.
- ASign the report immediately and tell the client about the external report so it can respond
- BWithdraw from the engagement at once and tell the client the reason, to protect the firm's reputation
- CSeek guidance from the MLRO about any consent or timing issues before completing work affecting the suspicious matter, avoid tipping off the client, and consider the effect on the audit and on ethical requirements such as confidentiality exceptionsCorrect
- DDestroy the internal report to prevent it being disclosed to the client
Explanation
After an external report, the firm must manage consent or timing issues through the MLRO, avoid any tipping off, and consider the impact on the audit, including whether to continue and what ethical position applies. Telling the client or giving the reason for withdrawal may tip off. Destroying records is itself unlawful and breaches documentation requirements.
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