CONFIDENTIALITY Information that is confidential to a client or employee acquired in the course of professional work should not be disclosed, except

where consent has been obtained from the client, employee or 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 for personal 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 full disclosure to them. In the absence of such an understanding the accountant should decline the appointment.

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 the directors 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 actual defaults, unlawful acts or non-compliance.

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 their response is in the best interest of the client. If, in the auditors opinion, the client would be best served by producing the documents, then provided 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 in most countries. In practice companies often pass a resolution at the AGM which empowers the directors to fix the auditors remuneration.

Provision for non-audit services External auditors are often seen as insufficiently independent because of the provision of nonaudit services. The auditors are often accused of being afraid to qualify the audit report for the fear 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 be achieved. If the internal auditor has been involved in operating a function or operating the controls, then that auditor should not then be put into the position of auditing the function.

AUDITORS RESPONSIBILITY FOR THE PREVENTION AND DETECTION OF FRAUD AND ERROR Isa 240 Fraud and Error states that fraud refers to intentional acts which may involve the falsification of documents and records, the misappropriation of assets, or the misapplication of accounting policies.

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