An Auditor Concludes That a Client Has Committed an Illegal

question 44

Multiple Choice

An auditor concludes that a client has committed an illegal act that has not been properly accounted for or disclosed. The auditor should withdraw from the engagement if the

• A) Auditor is precluded from obtaining sufficient competent evidence about the illegal act
• B) Illegal act has an effect on the financial statements that is both material and direct
• C) Auditor cannot reasonably estimate the effect of the illegal act on the financial statements
• D) Client refuses to take the remedial steps deemed necessary by the auditors

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Definitions:

Interest Paid

The total amount of interest paid by a borrower to a lender over a particular period for the use of borrowed money.

Bonds Interest Payable

This represents the amount of interest expense that a company owes to its bond investors but has not yet paid.

Annual Bond Interest

The total interest that will be earned on a bond over the course of a year.

Face Value

The nominal or principal value of a financial instrument as stated by the issuer, typically used for bonds or currency notes.