Other than inquiring of management about policies they have established to prevent illegal acts and whether management knows of any laws or regulations that the company has violated, the auditor should NOT search for indirect-effect illegal acts unless there is reason to believe they may exist.

Question

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The auditor should not search for indirect-effect illegal acts unless there is reason to believe they may exist. This is because the auditor's primary responsibility is to obtain reasonable assurance that the financial statements are free from material misstatement due to error or fraud, rather than to uncover all possible illegal acts. However, the auditor should be alert for any evidence of fraud, noncompliance, or illegal acts that is discovered during the audit and should consider the implications of such evidence for the financial statements. Additionally, the auditor should communicate any known or suspected fraud, noncompliance, or illegal acts to the appropriate level of management, including those charged with governance, as required by auditing standards.

Other Than Inquiring of Management About Policies They Have Established