When the Auditor Identifies or Suspects Noncompliance with Laws and Regulations

question 27

Multiple Choice

When the auditor identifies or suspects noncompliance with laws and regulations, the auditor

• A) should discuss the matter with those whom they believe committed the illegal act.
• B) should begin communication with the FASB in accordance with regulations.
• C) may disclaim an opinion on the basis of scope limitations if he or she is precluded by management from obtaining sufficient appropriate evidence.
• D) should withdraw from the engagement.

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Definitions:

Budget Variance

The difference between the budgeted or planned amount of expense or revenue, and the actual amount incurred or received.

Fixed Overhead Budget Variance

The variance between the budgeted and the actual incurred fixed overhead expenses.

Manufacturing Overhead Applied

The portion of estimated manufacturing overhead cost that is assigned to each unit of production based on a predetermined rate.

Labor-Hour

A labor-hour represents an hour of work performed by an employee, typically used as a basis for allocating labor costs or measuring productivity.