When the Auditor Knows That an Illegal Act Has Occurred

question 108

Multiple Choice

When the auditor knows that an illegal act has occurred, the first course of action by the auditor is to:

• A) consider the effects on the financial statements, including the adequacy of disclosure.
• B) not report it to the proper governmental authorities.
• C) withdraw from the engagement.
• D) issue an adverse opinion.

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Definitions:

Pilot Project

A small-scale, preliminary study conducted to evaluate feasibility, duration, cost, and adverse events, used to predict the potential of a larger initiative.

Diffusion Of Change

Refers to the process by which new ideas, products, or practices are spread within a society or from one society to another.

Stress Management

Techniques and practices individuals use to reduce, manage, and cope with stress.

Coercion

The practice of persuading someone to do something by using force or threats.