Question

Under the Code of Professional Conduct, what action should you take if you become aware of discrepancies between what the client has told you and some of the documentation that you have examined?

Answer 1

The code of professional conduct requires accountants and auditors to adhere to the ‘due care’ principle. As per this principle the accountants and auditors should observe the profession’s technical and ethical standards and should discharge their professional responsibility with integrity, objectivity and independence.

Thus if you become aware of discrepancies between what the client has told you and some of the documentation that you have examined you will further review the issue by seeking more details from the client and seeking examination of other related documents. In case the issue is not resolved you will ask the client for the reason for the discrepancy and then use your skill and competence to determine the valid position. You will have to properly determine if the discrepancy is an inadvertent error and an honest difference of opinion or whether it is deceit and subordination of principle. In case of an inadvertent error the same should be communicated to the client and in case of any deceit and subordination of principle the same should be red flagged. So depending on the situation you will issue either a disclaimer opinion or an adverse opinion in your report.