When an auditor believes that an illegal act may have occurred, the auditor should first
A) obtain an understanding of the nature and circumstances of the act.
B) consult with legal counsel or others knowledgeable about the illegal act.
C) discuss the matter with the audit committee.
D) withdraw from the engagement.

Question

Quizplus · Accepted Answer

Obtaining an understanding of the nature and circumstances of the act is the first step an auditor should take when they believe an illegal act may have occurred. This helps in assessing the impact of the act on the financial statements and determining the next steps in the audit process.

When an Auditor Believes That an Illegal Act May Have