ACCA Strategic Professional · Advanced Audit and Assurance (International) · Laws and regulations
Kestrel Foods Inc's auditor discovers that management has been discharging effluent in breach of environmental law. Management dismisses the matter and refuses to inform the regulator or take remedial action. Under the IESBA Code's NOCLAR provisions for an auditor, which step must the auditor consider after discussing the matter with management and those charged with governance and assessing their response?
After assessing management's inadequate response, the auditor must determine whether further action is needed in the public interest, which may include disclosing the matter to an appropriate authority. Confidentiality duties are not absolute for NOCLAR, but disclosure is judged against legal requirements and the circumstances, not automatic.
- ADetermine whether further action is needed in the public interest, such as disclosure to an appropriate authority, subject to legal and confidentiality considerationsCorrect
- BConclude that no action is possible because confidentiality is absolute
- CResign immediately and give the regulator the full audit file
- DAmend the financial statements personally to disclose the breach
Explanation
The Code requires the professional accountant to assess the appropriateness of the response and then determine whether further action is needed in the public interest, which may include disclosure to an appropriate authority. Confidentiality is not absolute, because the Code allows disclosure in these circumstances. Sending the whole file or altering the statements personally is not required.
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