Upon discovering non-compliance with laws and regulations, what is the auditor required to do?

When an auditor discovers non-compliance with laws and regulations during an audit, the appropriate course of action is to report the findings to management or those charged with governance, if applicable. This step is crucial because it aligns with the auditor's responsibilities to ensure that the organization is operating within the legal frameworks and standards applicable to its industry.

By reporting to management or governance, the auditor provides those in control of the organization an opportunity to address the issue, take corrective action, and potentially mitigate further risks. This communication allows the entity to respond not only to the specific incident of non-compliance but also to assess its compliance processes more broadly.

Timely reporting helps to uphold the integrity of the financial reporting system and ensures that any legal or regulatory implications are handled appropriately. Sharing this information with management or those charged with governance also supports the auditor's role in adding value to the organization.

The other choices may not effectively fulfill the auditor's responsibilities. For instance, reporting to shareholders immediately without first notifying management could undermine the governance structure and create unnecessary panic. Ignoring the non-compliance, even if perceived as not affecting the audit, neglects the auditor's duty to uphold ethical standards and does not support an effective audit process. Conducting an internal investigation is