If Specific Information Comes to an Auditor's Attention That Implies

question 45

Multiple Choice

If specific information comes to an auditor's attention that implies the existence of possible illegal acts that could have a material, but indirect effect on the financial statements, the auditor should next:

• A) Apply audit procedures specifically directed to ascertaining whether an illegal act has occurred.
• B) Seek the advice of an informed expert qualified to practice law as to possible contingent liabilities.
• C) Report the matter to an appropriate level of management at least one level above those involved.
• D) Discuss the evidence with those charged with governance.

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Definitions:

Inadequate Control

A situation where there is a lack of effective mechanisms to regulate or guide actions and processes towards desired outcomes.

Bounded Rationality Model

A concept suggesting that individuals make decisions based on the limited information available to them and within the constraints of their mental capacity.

Basic Models

Fundamental frameworks or approaches used to simplify and understand complex phenomena.

Organizational Decision Making

The process by which choices are made within an organization, involving the selection of alternatives based on the assessment of objectives and options.