ACCA Advanced Audit and Assurance (AAA) Practice Exam

According to ISA 250, what should auditors do when they identify suspected non-compliance with laws?

1. Ignore the findings as they may be irrelevant

2. Respond appropriately to the issues identified

3. Advise clients to seek legal counsel

4. Report all findings to external auditors only

The correct answer is: Respond appropriately to the issues identified

When auditors identify suspected non-compliance with laws according to ISA 250, they are required to respond appropriately to the issues identified. This principle emphasizes the auditor's responsibility to take non-compliance seriously and to follow a structured approach in addressing the findings. Auditors must assess the implications of the non-compliance for the financial statements, considering the potential impact on the entity's operations and financial reporting. It may involve discussing their findings with management and those charged with governance, and in some cases, it might require reporting the findings to regulatory authorities, depending on the severity and nature of the non-compliance. This response is crucial to maintaining the integrity of the audit process and ensuring that all relevant laws and regulations are adhered to. The auditor’s active engagement with the situation reflects an ethical commitment to transparency and compliance, essential components of the auditing profession.