An Auditor Who Discovers That Client Employees Have Committed an Illegal

question 69

Multiple Choice

An auditor who discovers that client employees have committed an illegal act with material consequences on the financial statements is most likely to seek legal advice and consider withdrawing from the engagement if ________.

• A)the illegal act is a violation of generally accepted accounting principles
• B)the client does not take appropriate action after being informed about the illegal act
• 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:

Producer Values

The set of ethical principles and standards that guide the behavior and practices of producers or manufacturers.

Buyer Surplus

Buyer surplus is the difference between the maximum amount a consumer is willing to pay for a good or service and the actual amount paid.

Producer Surplus

The difference between the amount producers are willing to supply a good for and the actual amount they receive (or market price).

Minimum Price

The lowest possible price at which a product or service can be sold, often regulated by governments to protect producers or consumers.