Question

The disclosure of fraud to parties other than the entity's senior management and its audit committee ordinarily would be precluded by the auditor's ethical or legal obligations of confidentiality. However, the auditor has a duty to disclose the information to parties outside the entity in all of the following circumstances except:

a) Legal requirement
b) Regulatory authorities
c) Court subpoena
d) Audit committee approval

Answer 1

The auditor has a duty to disclose fraud to parties outside the entity in certain circumstances, such as when there is a legal requirement, regulatory authority request, or court subpoena. Audit committee approval is not a circumstance that requires disclosure.

Step-by-step explanation:

The disclosure of fraud to parties outside the entity's senior management and audit committee would generally be precluded by the auditor's ethical or legal obligations of confidentiality. However, there are certain circumstances where the auditor has a duty to disclose the information to parties outside the entity. These include:

1. Legal requirement: If there is a legal requirement to disclose the fraud, such as a law or regulation that mandates reporting.
2. Regulatory authorities: If a regulatory authority, such as the Securities and Exchange Commission (SEC), requires the auditor to disclose the information.
3. Court subpoena: If there is a court subpoena that compels the auditor to disclose the fraud.

Audit committee approval is not a circumstance that would require the auditor to disclose the information to parties outside the entity. It is important for auditors to follow the ethical and legal obligations regarding confidentiality, while also fulfilling their duty to report fraud when required.