"AU Section 317, Illegal Acts by Clients, Par. 17 on Professional Standards states:

The auditor should assure himself that those charged with governance are adequately informed with respect to illegal acts that come to the auditor's attention. [1] The auditor need not communicate matters that are clearly inconsequential and may reach agreement in advance with the audit committee on the nature of such matters to be communicated. The communication should describe the act, the circumstances of its occurrence, and the effect on the financial statements. Senior management may wish to have its remedial actions communicated to the audit committee simultaneously. Possible remedial actions include disciplinary action against involved personnel, seeking restitution, adoption of preventive or corrective company policies, and modifications of specific control activities. If senior management is involved in an illegal act, the auditor should communicate directly with those charged with governance. [Revised, April 2007, to reflect conforming changes necessary due to the issuance of Statement on Auditing Standards No. 114.]

Chatwick Investments is being audited. During the audit, Lance Morrison, audit senior finds clear evidence of money laundering activities at Chatwick. Chatwick has set up a shell company in the Cayman Islands to help a group of doctors launder money and avoid U.S. taxes. The amounts are immaterial compared with the total dollar amount of investments handled by Chatwick, but public disclosure of the practice could materially harm Chatwick investment business.

Under Par. 17, does Mr. Morrison and the audit firm have obligations to disclose the money laundering activity beyond the company's boardroom? Do you think Morrison, as an individual, should do anything else?"