Which of the Following Is Correct Concerning Required Auditor Communications

question 26

Multiple Choice

Which of the following is correct concerning required auditor communications about fraud?

• A)Fraud that involves senior management should be reported directly by the auditor to the audit committee regardless of the amount involved.
• B)Fraud with a material effect on the financial statements should be reported directly by the auditor to the Securities and Exchange Commission.
• C)Any requirement to disclose fraud outside the entity is the responsibility of management and not that of the auditor.
• D)The professional standards provide no requirements related to the communication of fraud, but the auditor should use professional judgment in determining communication responsibilities.

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Definitions:

Retention Ratio

The percentage of a company's net income that is retained rather than being paid out as dividends, indicating reinvestment back into the business.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from revenues.

Stock Dividend

A dividend payment made in the form of additional shares of the company's stock, rather than cash.

Market Value

The current value of an asset or company based on the price at which it can be sold in the marketplace.