Previous post discussed how to handle indications that fraud or illegal acts may have taken place during a compilation or review.
Can you report that information outside the client organization?
SSARS 19 points out that there are ethical requirements and confidentiality requirements that indicate that’s probably not something you want to do.
No kidding. You had better make sure you are on really solid ground before you do that.
However, SSARS 19 indicates there are a few situations where an accountant might have to communicate this information outside of the organization.
The first possible exception would be certain legal or regulatory requirements which require disclosure. In the audit world, this could come into play when providing a single audit to an NPO receiving federal funding. The situation could develop where the accountant has a requirement to communicate the suspected fraud to the grant agency. In the compilation and review world, I can not quite picture how this would come into play, but there could be contractual terms or regulatory rules that create such a requirement.
A second possible exception would be responding to a successor accountant’s inquiry when that firm has taken over a review or compilation.
The third possible exception in the SSARS literature is if an accountant is responding to a subpoena.
SSARS 19 suggests that before communicating any such information to an outside party the accountant might wish to consult with legal counsel.
How’s that for understatement? Sounds like a phenomenally good idea to me. It would be a severely high-risk course to talk to anyone outside of the organization about possible fraud or illegal acts. Check with your attorney first!
Next post – what about inconsequential items?