An Auditor Concludes That a Client Has Committed an Illegal

question 41

Multiple Choice

An auditor concludes that a client has committed an illegal act that has not been properly accounted for or disclosed. The auditor is most likely to withdraw from the engagement when the:

• A) Auditor is precluded from obtaining sufficient competent evidence about the illegal act
• B) Illegal act has an effect on the financial statements that is both material and direct
• C) Auditor cannot reasonably estimate the effect of the illegal act on the financial statements
• D) Client refuses to take the remedial steps deemed necessary by the auditors

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Definitions:

Low Ball Tactic

A persuasion and selling technique where an initially attractive offer is made to get a commitment, which is then made less attractive before the deal is closed.

Social Influence

The effect that the words, actions, or mere presence of other people have on our beliefs, feelings, attitudes, or behavior.

Heuristic-Systematic Model

A dual-process theory of persuasion that suggests there are two ways people process information: through heuristics (quick, automatic thinking) and systematically (deep, thoughtful analysis).

Systematic Processing

A mode of thinking in which individuals take a more analytical and comprehensive path to evaluating information, as opposed to relying on general impressions.