If, as a Result of Auditing Procedures, an Auditor Believes

question 9

Multiple Choice

If, as a result of auditing procedures, an auditor believes that a client may have committed illegal acts, which of the following actions should be taken immediately by the auditor?

• A) Consult with the client's legal counsel and with the auditor's legal counsel to determine how the suspected illegal acts will be communicated to the shareholders.
• B) Extend normal auditing procedures to ascertain whether the suspected illegal acts may have a material effect on the financial report.
• C) Inquire of the client's management and consult with the client's legal counsel and/or other specialists, as necessary, to obtain an understanding of the nature of the acts and their possible effects on the financial report.
• D) Notify each member of the audit committee of the board of directors about the nature of the acts and request that they give guidance with respect to the approach to be taken by the auditor.

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Definitions:

Petty Cash Overage

A situation where the amount of petty cash on hand is more than the recorded amount, indicating discrepancies in transactions or recording errors.

Auxiliary Petty Cash Record

A supplementary accounting register used to track small or incidental expenses paid out in cash, aiding the main petty cash system.

Petty Cash Voucher

A petty cash form to be completed when money is taken out of petty cash.

Petty Cash Account

A modest sum of money maintained for covering small or unexpected costs.