Auditor's duty to expose circumstance that is deemed illegal
Q: Does whistleblower protection measures cover auditor?
Q: Is the requirement for auditor to report suspicious circumstance of the management's misconducts considered as responsibilities that go beyond the scope of auditor's work, as the International Standards of Auditing (ISA 240 - The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements) has covered only the auditing of financial statements?
A: Section 89/25 expected auditor to inform the facts on suspicious circumstances discovered during auditing of financial statements, it does not expect auditor to take further inspection on the case. The Capital Market Supervisory Board may issue notification determining type of suspicious circumstances for auditor to use as guidelines in auditing company's financial statement.
Q: Does information disclosure according to the Securities and Exchange Act B.E. 2535 go against auditor's ethics as specified in the Accounting Professions Act? In case there is discrepancy between the two Acts, which one auditor should adhere to?
A: The requirement on information disclosure aims to protect auditor who has discovered suspicious circumstance acquired from normal auditing of financial statements, which is under the present accounting standards and accounting professions' ethics. The objective of such requirement is also to report such misconduct to regulatory bodies or other related government entities to suppress the spread of such circumstance or damages. Such requirement is in line with international practices, even in the code of ethics established by International Federation of Accountants stipulated that it will not be considered as unethical behavior in terms of maintaining client's confidentiality. The code specified that accounting professions shall inform suspicious circumstance that may involve illegal activities to the appropriate public authorities as specified by law. Therefore, it may not be considered that information disclosure is in opposition to auditor's code of ethics.
Q: In compliance with Section 89/25, if auditor reports facts through Auditor's Report or informs the company's management through letter, will the auditor be considered performing duty according to Section 89/25? If it is not sufficient, what are the recommendations?
A: In case auditor has reported suspicious circumstances in the Auditor's Report, it will be considered that auditor already performed duties in compliance with Section 89/25. However, in case auditor has discovered suspicious circumstance but the limitation on scope is imposed by client, as a result the auditor is unable to obtain sufficient appropriate audit evidence, auditor should report audit committee to proceed with the matter. In case audit committee is aware of the matter but does not take further actions, it will be considered that auditor has performed duties in compliance with Section 89/25.
Q: What kind of behavior that requires auditor to report to audit committee?
A: Auditor has duties to report misconducts of directors, managers or persons responsible for company's / securities' company operations on the following offences:
- Section 281/2 Paragraph 2 (Director or executive of the company who fails to perform his duties with responsibility, due care and loyalty.)
- Section 305 (Person who damages, destroys, conceals, any property or document which the competent officer has seized, attached, kept, or ordered to be delivered as evidence.)
- Section 306 (Director or manager dishonestly deceives the public.)
- Section 308 (Director or manager dishonestly converts property to himself)
- Section 309 (Director, manager, or person damages, destroys juristic person's property.)
- Section 310 (Director or manager acts to prevent creditor from receiving payment.)
- Section 311 (Director or manager acts or omits to act in order to obtain unlawful gains.)
- Section 312 (Director or manager permits another to commit dishonest act in the account or document) and;
- Section 313 (Increasing penalties for director or executive of juristic person listed on the Securities Exchange or traded in any over-the-counter center who contravenes Section 307 308 309 310.)
Q: What level of suspicion and severity of circumstance that auditor should make a report?
A: Severity level or suspicion level that auditor should make a report will be later specified by the Capital Market Supervisory Board. Auditor can perform duties within the scope of current auditing financial statements and accounting standards. There is no extra requirement concerning auditing work.
Q: In case auditor reports suspicious circumstance but Audit Committee or the SEC later found out that company's executive did not commit dishonest act as accused, will there be any action taken against the auditor, as it may ruin the reputation of the alleged executive?
A: No, because it is an action that is in compliance with specified law. Auditor will be protected under whistleblower provisions as specified in Section 89/2. On the contrary, if the SEC probed into case and found that auditor was aware of illegal activities during auditing or reviewing of financial statements according to accounting standards but failed to report the SEC, auditor would be deemed committing an offence. Moreover, the SEC has obligation to maintain confidentiality of the acquired information in the same manner as other information acquired from performing its duties and is unable to disclose to the third party except that it is an exemption as specified in the law.
Q: Does the Securities and Exchange Act B.E. 2535 provide legal protection on person who gives information, examination on reliability of information and actions to be taken on a person providing false information?
A: Securities and Exchange Act B.E. 2535 establishes protection measures for employees of securities company and listed company who provide information to authority, which is specified in Section 89/2 “No securities company or company shall perform any unfair treatment against an officer, an employee or any other persons hired to work for the securities company or company, whether by changing his position, job description or work place, suspending, threat, harassment, lay-off or any other matters of unfair treatment against such person because the said person:
(1) gives information, cooperates or gives assistance by any means to the SEC, the Capital Market Supervisory Board or the SEC Office in cases where the officer, the employee or such other persons believe or have reasonable ground to honestly believe that there has been contravention of or failure to comply with this Act;
(2) gives statement, files document or evidence or gives assistance by any means to the SEC, the Capital Market Supervisory Board or the SEC Office for the purpose of consideration or inspection in cases where it is suspicious that there has been contravention or failure to comply with this Act, regardless of whether such person has done so in accordance with the order of the SEC, the Capital Market Supervisory Board or the SEC Office.
Any company fails to comply with the above provisions by performing unfair treatment against its officer, employee, or hired person shall be liable to criminal penalty specified in Section 281/1, including the involved executives.
Q: Does whistleblower protection measures cover auditor?