Which of the following statements best describes the auditor's responsibility with respect to illegal acts that do not have a material effect on the client's financial statements?
A) Generally, the auditor is under no obligation to notify parties other than personnel within the client's organization.
B) Generally, the auditor is under an obligation to inform the PCAOB.
C) Generally, the auditor is obligated to disclose the relevant facts in the auditor's report.
D) Generally, the auditor is expected to compel the client to adhere to requirements of the Foreign Corrupt Practices Act.

Question

Quizplus · Accepted Answer

The auditor's responsibility is to detect and report material misstatements in the financial statements. If an illegal act does not have a material effect on the financial statements, the auditor is generally not required to report it to parties outside of the client's organization. However, the auditor should consider discussing the matter with the client's management and may want to document the discussion and the client's response.

Which of the Following Statements Best Describes the Auditor's Responsibility