Question

Charles is at a neighbourhood Christmas party with several of his flatmates. Over a few
beers, Charles gets into a conversation with a neighbour, William, about mutual
acquaintances. Charles is a senior auditor with a large accounting firm (although he
tells William that he is a partner at the firm) and William works for a large bank. During
the conversation Charles and William discover that they have both had professional
dealings with a particular family-owned manufacturing company. William reveals that
the company’s line of credit is about to be cancelled because of some irregularities with
the security. Charles is concerned to hear this news because he has just participated in
the company’s financial report audit and there was no indication of any problems with
its borrowings. However, as Charles explains to William, he has his doubts about the
patriarch of the family, whom Charles believes is having an affair with his personal
assistant. Charles also tells William that the family has quietly increased its
shareholdings in a listed company that supplies components to the family
manufacturing company. The components manufacturing company is about to
announce to the share market that it has just won a very large, and very profitable,
contract with a Chinese company.

Discuss the ethical principles that are potentially breached by Charles’s
behaviour at the party and explain how the principles are breached.

Answer 1

Charles bring the senior auditor and involved in financial report audit is bound with confidentiality, which is breached by him by telling William about the contract won by the company.

As per code of ethics for Professional accountants, An existing accountant is bound by confidentiality. The extent to which
the professional accountant in public practice can and should discuss the affairs of a client with a proposed accountant will depend on the nature of the engagement and on:
(a) Whether the client’s permission to do so has been obtained; or
(b) The legal or ethical requirements relating to such communications
and disclosure, which may vary by jurisdiction.

Charles was neither having client's permission to disclose the information nor it was legal or ethical requirement.