Case 4.4 - Freescale Semiconductor
1. Identify the specific circumstances under which auditors are allowed to provide confidential client information to third parties.
a. Under rule 301.01 [ET section 301.01], “a member in public practice shall not disclose any confidential client information without specific consent of the client.” Rule 301 goes on to say that the rule does not relieve a member of his professional obligations under rule 202 (which charges an AICPA member who performs auditing to a standard to be set by the Council) and rule 203 (that requires an AICPA member to not express an opinion that a client’s financial data are in compliance). Rule 301.01 goes on to say that a member must produce information when under subpoena or summons, and that the rule shall not supersede the law or any government regulation. Also the rule says it shall not preclude a review of a member’s practice. Lastly, rule 301.01 states that a member shall not “use to their own advantage or disclose any member’s confidential client information that comes to their attention in carrying out those activities.
At the end of the day rule 301 states that “this prohibition shall not restrict members’ exchange of information in connection with the investigative or disciplinary proceedings described…” Rule 301.01 [ET section 301.01]
Accordingly, it would seem as if the standard set by the rules of the AICPA is that an auditor is bound to nondisclosure unless there is a judicial proceeding of some sort or they get permission from the client to disclose.
2. What would I do under the following circumstances?
a. My friend discloses to me highly confidential “market moving” information regarding soon-to-be announced merger.
i. Well for one, I would let my friend know before he finished that I was not interested in his confidential information. I would remind him that we had an obligation to maintain the confidential information and that the information he was telling me was beyond my scope. I would also try to
a. Under rule 301.01 [ET section 301.01], “a member in public practice shall not disclose any confidential client information without specific consent of the client.” Rule 301 goes on to say that the rule does not relieve a member of his professional obligations under rule 202 (which charges an AICPA member who performs auditing to a standard to be set by the Council) and rule 203 (that requires an AICPA member to not express an opinion that a client’s financial data are in compliance). Rule 301.01 goes on to say that a member must produce information when under subpoena or summons, and that the rule shall not supersede the law or any government regulation. Also the rule says it shall not preclude a review of a member’s practice. Lastly, rule 301.01 states that a member shall not “use to their own advantage or disclose any member’s confidential client information that comes to their attention in carrying out those activities.
At the end of the day rule 301 states that “this prohibition shall not restrict members’ exchange of information in connection with the investigative or disciplinary proceedings described…” Rule 301.01 [ET section 301.01]
Accordingly, it would seem as if the standard set by the rules of the AICPA is that an auditor is bound to nondisclosure unless there is a judicial proceeding of some sort or they get permission from the client to disclose.
2. What would I do under the following circumstances?
a. My friend discloses to me highly confidential “market moving” information regarding soon-to-be announced merger.
i. Well for one, I would let my friend know before he finished that I was not interested in his confidential information. I would remind him that we had an obligation to maintain the confidential information and that the information he was telling me was beyond my scope. I would also try to