Disclosure of criminal facts by the auditor

Auditors authorized to disclose

Article 270 of the CCC: Subject to the provisions of the preceding article, the auditors their collaborators, and the experts are bound to professional secrecy for the facts, acts, and information of which they may know of the course of their duties. The auditors must also report to the general meeting any irregularities or inaccuracies identified by them during the performance of their duties. In addition, they are obliged to disclose to the public prosecutor the criminal acts of which they were aware [1] without their liability being engaged for disclosure of professional secrecy.

Article 271 of the CCC: Is punishable by imprisonment of one year to five years and a fine of one thousand two hundred to five thousand dinars or one of these two penalties only, any auditor who has knowingly given or confirmed false information about the company’s situation or who has not revealed to the public prosecutor the criminal facts of which he knows. The provisions of the Criminal Law relating to the disclosure of professional secrecy shall apply to auditors. The OECT Standard 10 on the disclosure of infringements by the auditor in paragraph 14 states: « The auditor shall analyze the facts, including ensuring that they are material and that they are not merely an error or omission ».                 

Criminal acts

The «criminal facts» that the auditor must reveal to the public prosecutor are exclusively facts likely to receive a criminal classification (Contravention, offense, crime), within the meaning of the provisions of the Criminal Code and the Commercial Companies Code. Recall that a fact is only considered criminal when it combines the three constituent elements of the offence namely: the legal element, the material element, and the moral element. Among the facts that are likely to affect his report and that must be reported to the public prosecutor’s office, it must be noted: abuse of social property, forgery in writing, misappropriation of assets, false invoices, failure to draw up the annual accounts or those which do not give a true and fair view, fraudulent overvaluation of a contribution in kind, distribution of fictitious dividends, abuse of powers or votes, failure to call or hold a general meeting, the obstacle to the exercise of the functions of auditor. Criminal acts to be disclosed are offenses committed within the controlled society and relating to its activity.

Impact on statutory auditors' reports

If the irregularities to be revealed have an impact on the accounts (Booked incorrectly or not booked), the statutory auditor is required to:

• To reveal on the one hand the criminal act;

• Mention in a separate section at the level of Part 2 of the general report entitled «  Disclosure of criminal facts » said disclosure;

• Include in the first part of the general report an audit reserve (opinion with reservations) if the anomalies detected are significant. If the irregularities to be revealed have no impact on the accounts (accounting appropriately or not to be recorded), the statutory auditor is required to:

• To reveal on the one hand the criminal act;

• Mention in a separate section at the level of the second part of the general report entitled «Revelation of criminal facts» said revelation on the other hand.

This obligation to disclose is part of the continuity of the tasks assigned to the statutory auditors, to certify the accuracy and sincerity of the corporate accounts and to ensure equality between shareholders:

• The obligation to disclose to the Public Prosecutor, as soon as he becomes aware of it in the course of his mission, the irregularities likely to receive a criminal qualification applies even if that's such, it could not be defined precisely and without distinction relating to the gravity, nature or consequences of the facts likely to be classified as criminal.

• The auditor is required, by the provisions of Article 270 of the CSC, to disclose all criminal acts committed regardless of their significant nature and even if they have given rise to subsequent regularization.

• The auditor must disclose to the public prosecutor any criminal act committed within the company even if the public prosecutor is informed of this fact by the audited company or by any other interested party. A complaint lodged by the company against the perpetrator of the tortious act does not offend the auditor of his obligation to disclose the same fact to the public prosecutor.

• The auditor is only liable for non-disclosure in respect of facts of which he is aware, all the more so since the performance of normal due diligence may allow offenses to escape whose discovery presents technical difficulties or investigations exceptional. It follows that the statutory auditor cannot be held criminally liable even if he has not carried out the due diligence required for the audit which could have enabled him to discover the criminal acts; On the other hand, he is liable for negligence or criminal liability for confirmation of false information.

• For criminal acts committed before the appointment of the auditor, it is necessary to question the predecessor, if they exist, regarding any potential disclosures. If the predecessor did not disclose the facts, the current auditor must question them about the reasons and disclose them after analysis. If the facts were disclosed by the predecessor, the current auditor must document them and refrain from disclosing them.

• The statutory auditor of the parent company who has knowledge of a tort in a subsidiary may contact the statutory auditor of the subsidiary and confirm (even in writing) its findings. It is for the auditor holding the mandate to assess whether or not to disclose.

• However, it must be clarified that the application of the provisions of Article 270 of the SCC concerning the disclosure of criminal facts concerns commercial companies only.

To this end, this obligation is excluded, since it is not provided for in the relevant texts:

• Statutory auditors of public institutions, other than public limited companies, acting within the framework of Decree 87-529;

• Auditors of political parties;

• The auditors of the associations;

• Auditors of agricultural cooperatives;

• Auditors acting in the context of a contractual audit.                        

The form of the revelation

The legislator does not stipulate any deadline or any form of disclosure of criminal facts by the auditor. However, disclosure to the Crown must be made as soon as possible so as not to equate its silence with a waiver of its obligation to disclose, in any event, and unless there are justified exceptions, the disclosure must be made before the tabling of the general report.

As for the form, it would be preferable that the form be written following an interview with the public prosecutor. The letter of disclosure must be filed, against discharge, with the office of the public prosecutor at the court of first instance of the registered office of the company controlled.

This letter must notably contain:

• A reminder of the texts requiring the auditor to disclose;

• A complete identification of the controlled company;

• A detailed description of the facts and the reference of the texts defining the offense; 

• The complete identity of the perpetrator and his accomplices, the follow-up given by the perpetrator to the intervention of the auditor (to allow the public prosecutor to distinguish the error of good faith from the guilty intention).
  
  

[1] This knowledge must be effective and certain.