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Dear Ken,
Could you please help to clarify below answer provided by BBP as it is not completely clear to me?
Which of the following statements best reflects the auditor’s duty of confidentiality?
A. Auditor must never, under any circumstances disclose any matters of which they become aware during the course of the audit to third parties, without the permission of the client.
B. Auditors may disclose any matters in relation to criminal activities to the police or taxation authorities, if requested to do so by the police or a tax inspector.
C.Auditors may disclose matters to third parties without their client’s consent if it is the public interest, and they must do so if there is statutory duty to do so.
D: Auditors may only disclose matters to third parties without their client’s consent if the public interest or national security is involved.
The correct answer provided in the book is C with the following explanation:
There is no blanket prohibition on disclosure, nor is there any general right of the police or taxation authorities to demand information. Auditors have an implied contractual duty of confidentiality. There is no statutory duty of confidentiality
What does it mean: that ONLY if there is statutory duty auditor can disclose customers’ matter?
Moreover, my understanding was that auditor is legally obliged to disclose any customer’ matter about legal activities. If so why answer B is not correct?
Thank you in advance for your help
Best RegardsGabriella
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Hi
From my understanding auditor has obligation to REPORT suspicious activities to relevant authorities, you cannot just wait until the authorities request the information from you. For example money laundering, failure to report is also an offense which will result in 5 years imprisonment. And from F1 PROFESSION is different from OCCUPATION. You are in professional accountancy so acting on public interest is quite important.B. Auditors may disclose any matters in relation to criminal activities to the police or taxation authorities, if requested to do so by the police or a tax inspector.
This is simply wrong. An auditor is not required to disclose every illegal activity, but should not continue to act is the client refused to confess mend their ways.
If the auditor suspects money laundering then there is a statutory duty to inform the authorities. If it is in the public interest to disclose ( and it’s not clear what public interest is) then the auditors may disclose.
For example, if the client was paying staff below the legal minimum it would be difficult to claim that disclosure was in the public interest. The auditor should no inform the authorities but should point out the problem to the client and stop acting if the client does nothing about it.
If the client were manipulating safety results on a new product and selling the product would put the public at risk, then is is probably in the public interest to disclose that (legal adice should be sought).
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