• 10 Marks

AA – Nov 2021 – L2 – Q3a – Professional and Ethical Considerations

Lists areas of non-compliance by clients and explains actions auditors can take when they become aware of non-compliance situations.

The International Ethics Standards Board for Accountants (IESBA) code guides all Professional Accountants on how to respond when their clients are not complying with the laws and regulations of a country or a state.

Required:
i) State FIVE (5) areas where auditees can be non-compliant.
ii) When an auditor becomes aware of non-compliant situations, what FIVE (5) actions can the auditor take?

i) Areas where auditees can be non-compliant

  1. Fraud, corruption, and bribery.
  2. Money laundering, terrorist financing, and concealing proceeds of crime.
  3. Insider trading.
  4. Non-compliance with banking laws and regulations.
  5. Flouting environmental protection laws.
    (5 marks)

ii) Actions that an auditor can take in situations of non-compliance

  1. Obtain an understanding of the matter to determine its nature and implications.
  2. Advise management to take timely and appropriate remedial action to address or mitigate the effects of non-compliance.
  3. Deter further non-compliance where it has not yet occurred.
  4. Disclose the matter to the appropriate authority if necessary, considering legal obligations.
  5. Determine whether further action is needed based on the appropriateness of management’s response.
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