You are the auditor of Squirrel Fur Coats (Pty) Ltd. During the course of the transactions audit conducted earlier in the year, you discovered that the company was involved in illegal foreign exchange dealings. You complied with the requirements of Section 45 of the Auditing Profession Act, and subsequently reported the matter to the Independent Regulatory Board for Auditors during April. During September, the Attorney General indicated that he intended prosecuting the company for contravening Foreign Exchange Legislation and Regulations. On 29 October, your senior audit clerk reported that he had completed the audit for the year ended 30 September and that there were no significant problems or outstanding matters pertaining to the audit. However, the directors do not want to disclose the intended prosecution as they are of the opinion that it will seriously affect sales of the companys products. The directors have also intimated their intention to defend the action. The companys profit for the year was R900 000 and the maximum fine that may be imposed on the company if convicted is R1 000 000. The directors approved the financial statements on 22 October.

YOU ARE REQUIRED TO:

i. List the factors that you would have considered before concluding that the illegal foreign exchange dealings constituted a reportable irregularity in terms of Section 45 of the Auditing Profession Act.

ii. List the steps that you would have followed to report the matter in accordance with Section 45 of the Auditing Profession Act.