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Stop lying to auditors

Audit quality can be affected by false or misleading information. Christopher Arnull explores what might be done to discourage external parties providing this.

When auditors ask for information, relationships are key. Audit clients and subsidiaries and their directors should co-operate. Delaying the provision of requested information, or knowingly or recklessly making a false, misleading or deceptive statement to the auditor, can lead to sanctions. Auditors also need information from external parties, but if they provide misleading or false information, unless fraud can be shown, there is no remedy. As this can impact negatively on audit quality, might it help to amend the Companies Act 2006 (CA 2006) to give auditors wider access rights?

CA 2006 gives the auditor a right of access at all times to the company’s books and records, and a right to require the directors and employees and subsidiaries to provide such information as the auditor considers necessary for the audit. Legally privileged information can be withheld but doing so could prompt a qualification. For the audit client’s directors and employees and subsidiaries, delaying the provision of requested information, or knowingly or recklessly making a false, misleading or deceptive statement to the auditor, are criminal offences.

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