An Independent CPA Is Conducting an Audit of an Entity

question 54

Multiple Choice

An independent CPA is conducting an audit of an entity that is subject to the GAO audit standards, but is not subject to the OMB audit standards. While conducting the audit, the CPA found that the entity had violated a law that had a large, but not material, potential penalty associated with such violation. There was no accrual for the potential penalty or disclosure of the violation. What action(s) must the CPA take with regard to this violation?

• A) Nothing, since the financial statements are not materially misstated.
• B) Must issue an adverse opinion if the financial statements are not changed to reflect the violation.
• C) Must issue a report that details the violation and the potential dollar effect.
• D) Must report the incident to the local law enforcement agency.

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Definitions:

BPI Team

Business Process Improvement (BPI) Team focuses on analyzing business processes and workflows with the goal of finding ways to improve them, increase efficiency, and reduce costs.

Dark Fiber

Unused optical fiber cables installed for future use in telecommunications, not currently active but available for lease by service providers or companies.

Basic Fiber

The fundamental, raw filaments used in making textiles or for other industrial purposes.

BYOD Phenomenon

Refers to "Bring Your Own Device," a policy allowing employees to use their personal devices for work-related activities, increasing flexibility but also presenting security challenges.