An Auditor Concludes That a Client Has Committed an Illegal

question 41

Multiple Choice

An auditor concludes that a client has committed an illegal act that has not been properly accounted for or disclosed. The auditor is most likely to withdraw from the engagement when the:

• A) Auditor is precluded from obtaining sufficient competent evidence about the illegal act
• B) Illegal act has an effect on the financial statements that is both material and direct
• C) Auditor cannot reasonably estimate the effect of the illegal act on the financial statements
• D) Client refuses to take the remedial steps deemed necessary by the auditors

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Definitions:

Shareholders

Individuals or entities that own shares in a corporation, thus holding a portion of the company's equity.

Proxy Contests

A competition for the proxy votes of shareholders, typically aimed at gaining control of the company's board of directors.

Shareholder Votes

The process by which company shareholders exercise their right to vote on corporate matters, typically during annual general meetings.

Management

The process of directing and controlling a group or organization to achieve set goals, involving planning, organizing, leading, and controlling resources.