If the statutory auditor detects or suspects a breach, he or she must consider whether laws, regulations and ethical requirements require the statutory auditor to report to a competent authority outside the company or whether responsibilities are established under which this may be appropriate. When developing procedures to identify instances of non-compliance with laws and regulations, ISA 315, identifying and assessing the risks of material misrepresentation through understanding of the business and its environment, requires an auditor to gain a general understanding of: Candidates must take the exam to understand who is responsible for compliance with laws and regulations and who is responsible for detection is responsible for violations of laws and regulations. It is management`s responsibility to ensure that a company complies with relevant laws and regulations. It is not the auditor`s responsibility to prevent or detect violations. There may be cases where the auditor`s obligation of confidentiality may be waived by law or law. This may be the case if the auditor finds violations of laws such as drug trafficking or money laundering. `Acts of injunction or commission committed intentionally or unintentionally by the institution or persons entrusted with the management of the undertaking, by management or by other persons working for or under the direction of the undertaking which infringe applicable laws or regulations. Non-compliance does not include personal misconduct unrelated to the Company`s activities. For laws and regulations that indirectly affect the financial statements, the auditor conducts procedures to identify violations of those laws and regulations. ISA 250 provides examples in paragraph 6(b) of: The term “tip” means that the MLRO discloses something that interferes with an investigation. It is a criminal offence to draw the attention of money laundering practitioners to the fact that the auditor has suspicions or knowledge about their money laundering activities or that such suspicion or knowledge has been reported. It is not necessary for the auditor to establish all the facts or establish beyond any doubt that a criminal offence has been committed. The examiner only has to ensure that his suspicions are justified and obtain sufficient evidence to demonstrate that the allegations are made in good faith.
“Explain the responsibilities of Chuck Industries Co. management and auditors with respect to compliance with laws and regulations under ISA 250, consideration of laws and regulations in an audit. An important element of an external audit is the auditor`s audit of whether the client has complied with laws and regulations. The question itself was related to a brief scenario in which Chuck Industries Co was visited by the tax authority, which found that incorrect tax amounts had been deducted from the payroll because tax rates had not been updated the previous year, and the CFO had asked the accounting firm why he had not found this non-compliance with tax regulations. It is also a criminal offence for the MLRO not to report a suspicion of money laundering to the ANC or MLRO as soon as possible, and it is also a criminal offence for the MLRO not to report to the ANC. If the company is actively involved in money laundering, the signs are likely to be similar to those where there is a risk of fraud and may include: There are many laws and regulations that a reporting company must comply with in order to continue operating. For example, many companies must comply with strict health and safety regulations. A food manufacturer can comply with strict food hygiene laws, and an accounting firm has a code of ethics that it must follow from its professional association. These laws and regulations have direct and indirect effects on the financial statements. Identifying violations of laws and regulations can be difficult for auditors, especially when it comes to fraud and/or money laundering (see below in the article). For this reason, the statutory auditor should maintain a certain degree of professional professional skepticism and be aware of the possibility that other audit procedures used may alert the statutory auditor to non-compliance or suspicion of non-compliance with laws and regulations, and these procedures may include: If the auditor finds non-compliance with laws and regulations, The auditor must: persons notified. However, the auditor should be cautious because if he suspects that those in charge of corporate governance are involved, he must contact the next higher level of authority, which may include the audit committee.
If there is no higher authority, the auditor considers the need for legal advice. For laws and regulations that directly affect the financial statements, the statutory auditor will be concerned to provide sufficient and adequate audit evidence that the entity has complied with those laws and regulations. For example, when auditing payroll, the statutory auditor will be concerned to gather sufficient and adequate audit evidence to ensure that the tax rules have been correctly applied by the company, because if this is not the case (as in question 1(c) of audit F8 of December 2011), there is a risk that the company will be fined for non-compliance and the fines could be significant. either in isolation or when aggregated with other inaccuracies. In addition, amounts in the financial statements may also be inaccurate due to non-compliance with laws and regulations. Chartered accountants need to be very careful when it comes to money laundering issues – especially for a business that is primarily cash-based, as there are plenty of money laundering opportunities in these businesses.