Reporting to the govt

As Auditors we are required to report on various non compliances of the provisions of law that a client may liable for. due to some friendliness Between the client and CA the CA doesn't report the non compliance like he doesn't report on expense above 10000 in cash or advance or loan in cash rather he reports that the auditor is not able to verify due to non avaibility of information. isnt this dishonest and will there be any consequences for the CA for non reporting ? is such practice common in all CA firms?