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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional appointments

Kestrel & Partners wishes to resign as auditor of Dunmore Ltd after discovering that the directors have repeatedly refused to correct a known material fraud affecting the financial statements. Which approach is most appropriate under the IESBA Code and ISAs?

Kestrel should take legal advice, consider whether resignation is permitted, communicate with those charged with governance, and answer a proposed successor's enquiries honestly, including the fraud reasons where permitted. Concealing the matter, issuing a clean opinion or destroying working papers would breach ethical and professional duties.

  1. AResign immediately and give the successor auditor no information regardless of any enquiry
  2. BConsider legal advice and whether law permits resignation, communicate with those charged with governance, and respond to any lawful successor enquiry honestly, including the reasonsCorrect
  3. CRemain silent and issue a clean opinion to avoid conflict
  4. DResign after deleting the audit working papers to protect the client

Explanation

The auditor should consider professional and legal responsibilities, communicate with those charged with governance, and where permitted by the client's consent or law, be frank with the proposed successor, including known fraud. Refusing information misleads successors, a clean opinion would be inappropriate given the uncorrected fraud, and destroying papers is improper.

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