Auditing and assurance revision question and answer

Auditing and Assurance Revision Questions and Answers

Commission for the Investigation of Abuse of Authority (CIAA) has asked certain information from XYZ & Co.; Chartered Accountants relating to certain client of the audit firm for which legal proceeding is in process with CIAA. The XYZ & Co. refused to provide such information to CIAA. Is the action of XYZ & Co. is tenable?

Answer

Section 110 (114) of the Code of Ethics of the Institute of the Chartered Accountants of Nepal deals with “Confidentiality” A professional accountant shall comply with the principle of confidentiality, which requires an accountant to respect the confidentiality of information acquired as a result of professional and business relationships. An accountant shall:

a. Be alert to the possibility of inadvertent disclosure, including in a social environment, and particularly to a close business associate or an immediate or a close family member;

b. Maintain confidentiality of information within the firm or employing organization;

c. Maintain confidentiality of information disclosed a prospective client or employing organization;

d. Not disclose confidential information acquired as a result of professional and business relationships outside the firm or employing organization without proper and specific authority, unless there is a legal or professional duty or right to disclose;

e. Not use confidential information acquired as a result of professional and business relationships for the personal advantage of the accountant or for the advantage of a third party;

f. Not use or disclose any confidential information, either acquired or received as a result of a professional or business relationship, after that relationship has ended; and

g. Take reasonable steps to ensure that personnel under the accountant‟s control, and individuals from whom advice and assistance are obtained, respect the accountant‟s duty of confidentiality.
114.1 A1 Confidentiality serves the public interest because it facilitates the free flow of information from the professional accountant‟s client or employing organization to the accountant in the knowledge that the information will not be disclosed to a third party. Nevertheless, the following are circumstances where professional accountants are or might be required to disclose confidential information or when such disclosure might be appropriate:

(a) Disclosure is required law, for example:

i) Production of documents or other provision of evidence in the course of legal proceedings; or

ii) Disclosure to the appropriate public authorities of infringements of the law that come to light;

(b) Disclosure is permitted law and is authorized the client or the employing organization; and

(c) There is a professional duty or right to disclose, when not prohibited law:

i. To comply with the quality review of a professional body;

ii. To respond to an inquiry or investigation a professional or regulatory body;

iii. To protect the professional interests of a professional accountant in legal proceedings; or

iv. To comply with technical and professional standards, including ethics requirements.

In view of the above provision of Code of Ethics of the Institute of the Chartered Accountants of Nepal ; XYZ & Co. has the professional liability for disclosing the client`s information to CIAA , since a professional accountant is required law to disclose confidential information are to produce documents or to give evidence in the course of legal proceedings .
Hence the action of XYZ & Co. is not tenable, though the audit firm may consult ICAN before providing client`s information to CIAA.



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