When the Auditor Believes an Illegal Act May Have Occurred

question 62

Multiple Choice

When the auditor believes an illegal act may have occurred, it is necessary to:

• A) consult with the client's legal counsel.
• B) inquire of management, at a level above those likely to be involved with illegality.
• C) consider accumulating additional evidence to determine if there is actually an illegal act.
• D) all of the above

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Definitions:

Diseconomies of Scale

The phenomenon where, beyond a certain point, the cost per unit increases as the scale of operations expands.

Firm Size

A measure of a company's scale or magnitude, often estimated by metrics like sales, assets, or the number of employees.

Acquisition

It refers to the process or action by which one company takes over another company, either through purchase of its shares or assets.

Economy of Scale

Economy of Scale refers to the cost advantage that arises with increased output of a product, as fixed costs are spread out over more units of production.