Chapter 16 - Confidentiality

Question 1

Why is confidentiality a fundamental principle of both the IESBA (IFAC) and ICAEW Codes of Ethics?

Answer 1

Accountants require access to information about their business that clients would not want made public externally - need their clients to be comfortable to make full disclosure of company affairs to them

Question 2

What procedures can be followed to prevent accidental disclosure of confidential client information

Answer 2

• Do not discuss client matters with any party outside of the accountancy firm (for example, friends and family, even in a general way)
• Do not discuss client matters with colleagues in a public place
• Do not leave audit files unattended (at a client’s premises or anywhere)
• Do not leave audit files in cars or in unsecured private residences
• Do not remove working papers from the office unless strictly necessary
• Do not work on electronic working papers on systems that do not have the requisite protection

Question 3

When can information acquired in the course of professional work be disclosed to a third party?

Answer 3

• Consent has been obtained from the client, employer or other proper source
• There is a public duty to disclose
• There is a legal or professional right or duty to disclose.

Question 4

What types of legal issues may warrant disclosure?

Answer 4

• Fraud
• Terrorist activities
• Regulatory breaches
• Money laundering

Question 5

What avenues should each of these legal issues be disclosed through?

Answer 5

• Where the auditor has uncovered an employee fraud and the client is in agreement that the matter should be referred to the police.
• Reporting clients involved in terrorist activities to the police.
• Reporting directly to regulators such as the Financial Conduct Authority on regulatory breaches in respect of financial service and investment businesses or the Charity Commission in respect of charities.
• The reporting of suspected money laundering (for example tax evasion) to the National Crime Agency through the MLNO.

Question 6

What is money laundering?

Answer 6

Money laundering is defined as the process by which criminal proceeds are sanitised to disguise their illicit origins. It also includes and gain from non-compliance with laws and regulations.

Question 7

Give some examples of money laundering

Answer 7

Keeping customer overpayments (theft?)
Offences under the Companies Act that are criminal
Offences that involve a saved cost (such as failure to meet environmental regulations about disposal and dumping waste instead)

Question 8

What are the criminal offences accountants need to avoid related to money laundering?

Answer 8

• Failure to report a suspicion of money laundering
• Tipping off a suspected money launderer that a report has been made

Question 9

What is a Money Laundering Nominated Officer (MLNO)?

Answer 9

Question 10

What is a Money Laundering Compliance Principal (MLCP)?

Answer 10

Question 11

Do accountants report money laundering directly to the National Crime Agency?

Answer 11

An audit team member will never be required to make a report to the authorities personally. It will always be appropriate for him to make the report of the suspicion to the MLNO

Question 12

CONFLICT OF INTEREST