Discovery of unlawful acts

When an auditor discovers unlawful acts, usually he is not expected to disclose to the police or other authorities unless:

• The client authorises disclosure;
• That disclosure is compelled by process of law for example, a court order;
• That disclosure is required in the auditor's own defence;
• The conditions are such that the auditor has a public responsibility to disclose, for illustration, when the client has committed a serious crime or his act is treasonable.

Hence to sum up, the auditor on discovery of an unlawful act must do nothing positively to assist in the offence or to prevent its disclosure. He should bring all offences of employees to observe of his clients. When the offence is such that its non-disclosure means that the accounts are not showing an accurate and fair view, then the auditor must insist on disclosure or qualify his audit report. Discovery of material defects in prior accounts must be pointed out to the client with recommendation for disclosure.