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Eeyore Co is a subsidiary of a major global car manufacturer. During the current year audit, the audit team discovered that Eeyore Co had developed and used a device which gave false readings during government tests which are required for all cars. The false readings enabled cars to meet government restrictions on carbon emissions which would otherwise have failed and therefore could not have been sold. The audit engagement partner has discussed the matter with senior management of Eeyore Co and advised them to report the matter to the industry regulator. Senior management has refused and reminded the engagement partner that the audit firm has a duty of confidentiality towards the company.
Senior management is correct that reporting the company will constitute a breach of confidentiality. T/F?
maam i understand that in the above case, the auditor has a responsibility to disclose the matter to the regulators and the public, however it will still be a breach of confidentiality at the end of day! so technically the answer should be true. because without breaching the confidentiality agreement we cannot disclose it, and when we disclose it to public, regulators etc. confidentiality is breached!
It isn’t a breach if the auditor has a legal or professional duty to report a matter to a third party.