The Auditor Is Concerned About the Client's Compliance with Laws

question 38

Multiple Choice

The auditor is concerned about the client's compliance with laws and regulations that have an indirect impact on the financial statements.Because of the inherent limitations of an audit,there is an unavoidable risk that some material misstatements in the financial statements may be undetected.This risk is greater related to potential violations of laws and regulations for which of the following reasons?

• A)many government contracts refer to a specific set of regulations
• B)many government programs are subject to state and federal laws
• C)many laws and regulations do not affect the financial statements
• D)noncompliance may involve conduct designed to conceal the noncompliance
• E)whether an action constitutes noncompliance is a matter for determination by the board of directors
• F)both A and B
• G)both C and D
• H)both D and E

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Definitions:

Rent Controls

Government-imposed limits on the amount landlords can charge for renting out their property to ensure affordable housing for tenants.

Rental Units

Housing units, such as apartments or houses, that are available for rent to tenants.

Surplus

A situation where the quantity supplied of a good exceeds the quantity demanded at a given price.

Price Ceiling

A legal maximum price that can be charged for a good or service, typically set by government regulation.