An Auditor Who Discovers That Client Employees Have Committed an Illegal

question 34

Multiple Choice

An auditor who discovers that client employees have committed an illegal act that has a material effect on the client's financial statements most likely would withdraw from the engagement if:

• A)the illegal act is a violation of generally accepted accounting principles.
• B)the client does not take the remedial action that the auditor considers necessary.
• C)the illegal act was committed during a prior year that was not audited.
• D)the auditor has already assessed control risk at the maximum level.

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Definitions:

Say's Law

An economic theory proposing that supply creates its own demand, meaning production inherently creates the means to purchase other goods.

Keynesian Theory

Keynesian Theory is an economic theory stating that government intervention through fiscal and monetary policy is necessary to manage aggregate demand and address economic cycles.

Government Intervention

Actions taken by a government to affect the economy, which can include regulations, subsidies, tariffs, and monetary policies.

Expected Rate Of Profit

The anticipated return on an investment, taking into account the risk and time value of money.