ACCA Strategic Professional · Advanced Audit and Assurance (International) · Laws and regulations
Orrin Logistics' auditor suspects the finance director has been involved in bribing a local official to win contracts, which may be a material non-compliance. The auditor has discussed it with the managing director, who is also implicated, and no other governance body exists to which a report could effectively be made. The jurisdiction has no statutory reporting duty for this matter, and the IESBA Code applies. What should the auditor do?
The auditor should consider obtaining legal advice and decide whether disclosure to an appropriate authority is justified under the Code's NOCLAR provisions and any applicable law. Confidentiality is not absolute where management fails to respond, but disclosure to the press is inappropriate and resignation alone is not sufficient.
- ATake no further action because confidentiality always prevents disclosure
- BConsider the need to obtain legal advice and consider whether disclosure to an appropriate authority is justified, having regard to the Code's responding-to-NOCLAR provisions and any legal dutiesCorrect
- CDisclose directly to the press to protect the public interest
- DResign immediately without considering any other action
Explanation
The IESBA Code (NOCLAR provisions) and ISA 250 both recognise that where management and governance do not respond appropriately, the auditor determines whether further action is needed, including disclosure to an appropriate authority, which may override confidentiality where permitted. Legal advice should be considered. Confidentiality is not absolute, and press disclosure is not an appropriate authority.
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