Whistleblowing in professional conduct

Whistleblowing means informing the proper
authorities of some significant breach of law or regulation. It is an issue for
employees who feel compelled to tell the proper authorities of some wrong doing
by their employers, but fears being dismissed if they do. In this case
employees are protected under the public interest Disclosure Act
1988.

Employees of companies, who are also members of
professional accountancy bodies, may be required by their ethical code,
particularly the aspects of it relating to integrity and objectivity, to make
reports.

Protections are available if reports are made;

·
In the
public interest;

·
To the
proper authorities;

·
Without
malice.

Reports to an outside body, such as regulatory authority,
by professional accounts, be they auditors or employees, can be defended
against any accusation of breaching client confidentiality as the matter would
be in the public interest.

There are additional issues for auditors;

·
If
auditors become aware of a significant non-compliance they should report it to
the directors in the first instance with a recommendation that it should be
disclosed to the proper authority.

·
If the
directors don’t do that then the auditors should report it, relying on the
public interest defense to guard them against accusations of breach of client
confidence.

·
Breaches
of law or regulation may have an impact on the financial statements and the
auditors should assess what this effect might be and the disclosures which
might be required. This may have an influence on their audit report if suitable
disclosures are not made in the financial statements.