Which of the following is an accurate statement concerning the auditor's responsibility to consider laws and regulations?
A) Auditors can follow an easy, step-by-step procedure to determine how laws and regulations impact the financial statements.
B) The auditor's responsibility will depend on whether the laws or regulations are expected to have a direct impact on the financial statements.
C) It is the responsibility of the auditor to determine if an act constitutes noncompliance.
D) The auditor must inform an outside party if management has knowingly not complied with a law or regulation.

Question

Quizplus · Accepted Answer

The auditor's responsibility to consider laws and regulations pertains to those laws and regulations that are expected to have a material impact on the financial statements. The auditor is not expected to have expertise in all areas of law and regulation, but is responsible for obtaining an understanding of the legal and regulatory framework relevant to the entity and how it may impact the financial statements. Furthermore, if the auditor becomes aware of noncompliance with laws and regulations that could have a material effect on the financial statements, they are required to communicate such noncompliance to those charged with governance. If the noncompliance persists or management knowingly fails to address the noncompliance, the auditor may need to report to an outside party, such as a regulatory agency.

Which of the Following Is an Accurate Statement Concerning the Auditor's