SBM – Ethics notes

Fraud
 The ethical issues surround the right or duty to disclose the fraud. These are ethical issues for the company
and for XYZ as an individual, as THEY are a ICAEW Chartered Accountant.
 A key issue is whether the fraud would be deemed to be money laundering. If it is, it would fall under the
Money Laundering Act which imposes additional duties of disclosure to the National Crime Agency (NCA).
On the facts available, it would seem that THIS IS THE CASE / IS NOT THE CASE.
 If the company is advised that it is money laundering, then it should be disclosed to the NCA without
informing XYZ
 If it is not money laundering, then the 'victims' of the crime are the shareholders and, as a consequence, the
directors have a duty to act in their interests. The size of the fraud is likely to be small, so the amount is not
material. Disclosure to shareholders is likely to also involve public disclosure which may not be beneficial to
the reputation of the company and to the shareholders. There would therefore not appear to be a duty to
disclose publicly, although there is clearly the right to disclose.
 A further more general ethical issue also arises in that a crime has been committed and if not disclosed then
the perpetrators will go unpunished. This raises ethical issues of equity and justice.
 The internal control deficiency is however important and, as a material issue, it should be disclosed to those
charged with governance and to the external auditors.
 XYZ should consider obtaining advice from the ICAEW ethics helpline.