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CONFIDENTIALITY

Information that is confidential to a client or employee acquired in the course of professionalwork should not be disclosed, except where consent has been obtained from the client, employeeor other proper source or where there is a public duty to disclose, or where there is a legal or

professional right or duty to disclose.

Information gathered during the course of work should not be used or appear to be used forpersonal benefits or for the benefit of a third party.

An accountant should only work for a client with the understanding that the client will make fulldisclosure to them. In the absence of such an understanding the accountant should decline theappointment.

Confidentiality Override

Members have an obligation to disclose to various authorities:

Where the court orders them to do so Where the client is suspected to be involved in acts of terrorism Where they suspect their client to be in drug trafficking or laundering the proceeds of

drug trafficking Under the banking, insurance, insolvency and financial services legislation, to the

appropriate regulators, where they consider that their client is either acting recklessly, or

is not a fit and proper person to be managing such a business.Whistle-blowing responsibilities

Where auditors become aware of a suspected or actual non-compliance with laws and regulation,which gives a statutory right to report, they should report to the proper authority immediately.

If the auditors believe that the matter is in the interest of the public interest they should notify thedirectors of their view. If the directors do not disclose then the auditors should themselves do so.

Examples of these could be: property development, waste disposal, investment businesses and

pension schemes.Auditors should take legal advice before making any decision to disclose suspected or actualdefaults, unlawful acts or non-compliance.

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Auditors Working papers

The working papers are the property of the auditor and any request for them should be refused.

However, if the taxation authorities requests the requests the production of working papers

relating to a particular client, whose affairs are under investigation, auditor should ensure theirresponse is in the best interest of the client.

If, in the audit ors opinion, the client would be best served by producing the documents, thenprovided the client has no objections, the auditor may do so.

AREAS OF CONTROVERSY

Negotiation of the audit fee

Shareholders have the right to appoint the auditor and agree their remuneration based on laws inmost countries. In practice companies often pass a resolution at the AGM which empowers thedirectors to fix the auditors remuneration.

Provision for non-audit services

External auditors are often seen as insufficiently independent because of the provision of non-audit services. The auditors are often accused of being afraid to qualify the audit report for thefear of losing the fees obtained for non-audit work.

Internal Audit Independence

Internal auditors are employed by the business and so their independence is more difficult to beachieved. If the internal auditor has been involved in operating a function or operating thecontrols, then that auditor should not then be put into the position of auditing the function.

AUDITORS RESPONSIBILITY FOR THE PREVENTION AND DETECTION OF FRAUDAND ERROR

Isa 240 Fraud and Error states that fraud refers to intentional acts which may involve thefalsification of documents and records, the misappropriation of assets, or the misapplication of accounting policies.

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Errors refers to the unintentional misapplication of accounting policies, oversights or misinterpretation of facts and clerical errors.