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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Code of Ethics for Professional Accountants

Priya, an audit senior at Harlow & Co, is asked by the audit partner to sign off a file even though she believes a key inventory valuation is materially overstated. The partner says the client is a major fee source and the issue should be dropped. Under the IESBA Code's approach to resolving ethical conflicts, what should Priya do first?

Priya should first assess the facts, the ethical issues and the fundamental principles at stake, then follow the firm's internal escalation or conflict-resolution procedures. External reporting or resignation comes later if the matter is unresolved, and signing off against her judgement would breach the Code.

  1. AConsider the relevant facts, ethical issues and fundamental principles involved, and follow the firm's internal escalation or conflict-resolution proceduresCorrect
  2. BReport the matter immediately to the client's regulator without consulting anyone at the firm
  3. CSign off the file because the partner holds the final authority on audit judgements
  4. DResign from the firm immediately and inform the client of her reasons

Explanation

The Code expects a professional accountant facing a conflict to consider the facts, the ethical issues and the fundamental principles, and to use the firm's established escalation procedures. Immediate external reporting or resignation skips these steps. Signing off would breach objectivity and professional competence and due care.

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