An auditor who discovers that client employees have committed an illegal act that has a material effect on the client's financial statements most likely would withdraw from the engagement if
A) The noncompliance is a violation of generally accepted accounting principles.
B) The client does not take the remedial action that the auditor considers necessary.
C) The illegal act was committed during a prior year that was not audited.
D) The auditor has already assessed control risk at the maximum level.

Question

Quizplus · Accepted Answer

If the client does not take the remedial action that the auditor considers necessary, the auditor has no other option but to withdraw from the engagement as their reputation and independence would be at risk. It is the auditor's responsibility to ensure that the financial statements are free from material misstatements, which includes illegal acts committed by client employees. The other options (A, C, and D) are not relevant factors in determining whether the auditor should withdraw from the engagement.

An Auditor Who Discovers That Client Employees Have Committed an Illegal