Acca aaa s21 Notes

5. Reporting non-compliance
All incidents of non-compliance should be reported to TCWG (unless trivial).
If the auditor believes non-compliance is deliberate, this should be communicated to TCWG.
If TCWG are complicit in the non-compliance, and there is no higher level of authority (such as a 
parent's board or audit committee) then the auditor should take legal advice.
If non-compliance gives rise to material misstatement in the financial statements, the audit opinion 
will have to be modified (qualified or adverse)
If the auditor is prevented from investigating the matter, the audit opinion will have to be modified 
(qualified or disclaimer).
It is important that all discussions, findings and disclosures are well-documented as there is obviously 
a high risk to the auditor of fallout from these incidents.
Under the NOCLAR provisions in the IESBA standard the auditor should:
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Advise management and TCWG to take timely and appropriate action to remedy or avert non-
compliance.
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Disclose the matter to the appropriate authority (unless precluded by law or regulation) for 
investigation and action to be taken in the public interest.
The auditor must assess management’s response then decide if further action is required in the public 
interest. Simply resigning from the engagement is NOT a substitute for taking appropriate further 
action. If, however, withdrawal is the only available course of action, the proposed successor should 
be informed of the matter (even without the former client's permission).
Whether the auditor should disclose the matter to the authorities depends on the actual or potential 
harm that might be done to investors, employees, general public and so on. Examples where 
disclosure is likely to be justified include:
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Bribery
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The sale of harmful products
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Tax evasion
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Behaviour likely to damage financial markets.
If the disclosure is made in good faith it will not be considered to be a breach of confidentiality.