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Professional responsibilities and liability

1.3 Procedures

 Obtain a general understanding of the client's legal and regulatory environment.

 Inspect correspondence with relevant licensing and regulatory authorities.

 Enquire of management and those charged with governance as to whether the
entity is compliant with laws and regulation.

 Remain alert to possible instances of non-compliance e.g. reading board
minutes, inspecting correspondence from lawyers and through performing
substantive procedures.

 Obtain written representation that the directors have disclosed all instances of
known and possible non-compliance to the auditor.

1.4 Identification of non-compliance

When the auditor becomes aware of information concerning a possible instance of
non-compliance with laws or regulations, they should:

 understand the nature of the act and circumstances in which it has occurred

 obtain sufficient other information to evaluate the possible effect on the financial
statements by performing the following procedures:

– Enquire of management of the penalties to be imposed.

– Inspect correspondence with the regulatory authority to identify the
consequences.

– Inspect board minutes for management's discussion on actions to be
taken regarding the non-compliance.

– Enquire of the company's legal department as to the possible impact of the
non-compliance.

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