An Auditor Who Finds That the Client Has Committed an Illegal

question 40

Multiple Choice

An auditor who finds that the client has committed an illegal act would be most likely to withdraw from the engagement when the:

• A)illegal act affects the auditor's ability to rely on management representations.
• B)illegal act has material financial report implications.
• C)illegal act has received widespread publicity.
• D)auditor cannot reasonably estimate the effect of the illegal act on the financial report.

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Definitions:

Average-Fixed-Cost

The fixed costs of production divided by the quantity of output produced; it decreases as production increases.

Average-Variable-Cost

The total variable cost divided by the quantity of output produced.

Marginal Costs

The investment required to manufacture an incremental unit of a product or service.

Variable Costs

Costs that change in proportion to the level of activity or production volume.