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Confidentiality Notes 21 / 23

Disclosure of Client Information (ACCA AA Exam Focus)

General Rule of Confidentiality

Auditors must not disclose client information unless:

  • Legal/professional duty requires it (e.g., statutory reporting).
  • Client authorises disclosure (e.g., for third-party due diligence).

Key Principle: All unpublished client information (e.g., financial data, internal controls) is confidential.

Exceptions Permitting Disclosure

1. Obligatory Disclosure (Legal Requirements)

Auditors must disclose when:

  • Law/regulation compels it (e.g., court orders, anti-money laundering laws).
  • Non-compliance with laws is identified (e.g., fraud, tax evasion).

Examples:

  • Reporting suspected money laundering to authorities.
  • Responding to statutory requests from tax authorities.

2. Voluntary Disclosure (Professional/Public Interest)

Auditors may disclose without client consent if:

  • Public interest is at risk (e.g., health/safety hazards, systemic fraud).
  • Protecting the auditor’s interests (e.g., defending against legal claims).

Limitations:

  • Requires legal advice to avoid liability.
  • Document rationale for public interest disclosures.

Key Exam Scenarios

SituationPermitted Disclosure?Reason
Client involved in money launderingYesStatutory obligation under AML laws.
Police request audit files without a court orderNoConfidentiality applies unless legally compelled.
Client underpaying staff wagesNoNot severe enough for public interest exemption.
Auditor sued for negligenceYesDisclosure allowed to defend professional interests.

Safeguards & Documentation

  • Client consent: Obtain written approval before sharing data.
  • Documentation: Record decisions, legal advice, and disclosures.
  • Secure handling: Restrict access to confidential data.

Common Exam Pitfalls

  • Confusing public interest with minor issues (e.g., wage underpayment ≠ public harm).
  • Assuming disclosure to non-governmental bodies (e.g., industry regulators) is always allowed.

Key Takeaways for Exams

  1. Prioritise legal duties: Statutory requirements override confidentiality.
  2. Apply public interest test: Only severe risks (e.g., terrorism, systemic fraud) justify voluntary disclosure.
  3. Document everything: Rationale for disclosures must be clear and defensible.