The proposals would introduce into the Code of Ethics for Professional Accountants a description of the circumstances in which a professional accountant is required or expected to breach confidentiality and disclose the act to an appropriate authority.

The proposal would require a professional accountant when encountering a suspected illegal act to take reasonable steps to confirm or dispel the suspicion and to discuss the matter with the appropriate level of management. If the response of those with whom the matter has been discussed is not appropriate, the professional accountant shall escalate the matter to higher levels of management and those charged with governance, as appropriate.

If the response is not appropriate and, in the judgement of the professional accountant, the suspected illegal act is of such consequence that disclosure would be in the public interest:

• a professional accountant providing professional services to an audit client would be required to disclose certain illegal acts to an appropriate authority
• a professional accountant providing non-audit services to a client that is not an audit client and a professional accountant in business would be required to disclose the matter to the entity’s external auditor, if any, and, in certain circumstances, would have a right to disclose certain illegal acts to an appropriate authority and would be expected to exercise that right.

The proposals require a professional accountant to consider and comply with any applicable legal or regulatory requirements and to consider whether it is appropriate to terminate the professional relationship with the client or resign from the employing organisation.

Comments on the IESBA exposure draft close on 15 December 2012.  Click for IESBA press release (link to IFAC website).