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:

Foreseeable User

A person who is reasonably expected to use a product and whom the manufacturer or provider should consider when designing or supplying the product.

Securities Exchange Act of 1934

A U.S. federal law governing the trading of securities in the secondary market, overseeing transactions, requiring disclosure, and aiming to prevent fraud.

Scienter

A legal term referring to the knowledge of wrongdoing, particularly the party's intent to deceive or act fraudulently in securities law.

GAAS

Generally Accepted Auditing Standards; guidelines for auditors in the conduct of financial audits.