Which of the Following Statements About Illegal Acts Committed by Clients

question 20

Multiple Choice

Which of the following statements about illegal acts committed by clients is correct?

• A)An auditor has no responsibility to detect illegal acts that have an indirect effect on the financial statements.
• B)An audit in accordance with generally accepted auditing standards normally includes audit procedures specifically designed to detect illegal acts that have an indirect but material effect on the financial statements.
• C)An auditor considers illegal acts from the perspective of the reliability of management's representations rather than their relation to audit objectives derived from financial statement assertions.
• D)An auditor's responsibility to detect illegal acts that have a direct and material effect on the financial statements is the same as that for errors and irregularities.

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Definitions:

Negative Externality

A cost that is suffered by a third party due to an economic transaction or activity.

Production

The act of merging diverse physical and non-physical inputs (including blueprints and skills) to produce goods for consumption.

Gasoline

A liquid fuel derived from petroleum, primarily used to power internal combustion engines in vehicles.

Private Value

The valuation of a good or service to an individual or entity, reflecting personal utility rather than market or societal value.