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:

Encoding

Encoding in communication is the process of converting ideas into a message using symbols, words, or gestures to convey information to another.

Decoding

The process of interpreting and understanding the meaning of information received in communication.

Interpreting

The process of understanding and explaining the meaning of information, actions, or events.

Mimicking

The act of imitating or replicating the behavior, actions, or sounds of another person or entity, often to learn or blend into an environment.