Reference no: EM132032384

Question - Abrar, the new intern at ASZ & Co, a leading accounting firm, first assignment is to prepare a short note on the AICPA ET 301 Confidential Client Information which states that ‘A member in public practice shall not disclose any confidential client information without the specific consent of the client." According to Ai Hui, the senior auditor, it is important that Abrar studies the implication of the above standard to ensure that client information are kept confidential and to know the circumstances when client information can be communicated.

REQUIRED:

(a) Briefly explain the purpose of the confidentiality principle. Why is it important to ensure client of confidentiality of information?

(b) Under what circumstances and who are the parties to which the information can be communicated?

(c) Assume that an auditor is the partner in charge of two separate engagements but during the conduct of the audit of Client X, the auditor learns of information that will materially affect the audit of Client Y. Client Y is not aware of the information (the inability of Client X to pay its debt to Client Y). What alternative sources of action are available to the auditor? Would communication of the information to Client Y be considered a violation of confidentiality? What guidance might the auditor seek in developing an answer to this ethical dilemma?

(d) Is the auditor's report considered a confidential communication? Explain.