In what situation is an auditor permitted to disclose information to third parties?

The correct response relates to instances when there exists a legal or ethical obligation that permits auditors to disclose information to third parties. This includes situations where there is a duty to disclose due to laws and regulations, or when the auditor is required to protect the public interest or fulfill a legal obligation.

For instance, auditors may have a duty to report certain findings to regulators or authorities to ensure compliance with financial laws and standards. This principle helps maintain transparency and trust in the financial reporting and auditing process, as it allows for necessary action to be taken when significant issues arise that could impact stakeholders or the public.

In contrast, disclosing information for personal gain or business interests does not fall under the permissible reasons for sharing confidential client information. Similarly, while there might be cases of fraud that necessitate disclosure, such situations are often encompassed within the broader duty to disclose rather than being stand-alone circumstances. Furthermore, requests from shareholders for information do not automatically grant the auditor the right to disclose if there's no legal duty or professional obligation to do so.