Under the Private Securities Litigation Reform Act,independent auditors are required to
A) Report in writing all instances of noncompliance to the client's board of directors.
B) Report to the SEC all instances of noncompliance they believe have a material effect on financial statements if the board of directors does not first report to the SEC.
C) Report clearly inconsequential noncompliance to the audit committee of the client's board of directors.
D) Resign from the audit engagement and report the instances of noncompliance to the SEC.

Question

Quizplus · Accepted Answer

Under the Private Securities Litigation Reform Act, independent auditors are required to report to the SEC all instances of noncompliance they believe have a material effect on financial statements if the board of directors does not first report to the SEC. This requirement aims to ensure that the SEC is aware of any material misstatements or omissions in financial statements that could have an impact on investors' decisions. However, auditors are not required to resign from the audit engagement unless the noncompliance is so severe that it undermines their independence or competence. They are also not required to report inconsequential noncompliance to the audit committee, as it is not material enough to affect the financial statements.

Under the Private Securities Litigation Reform Act,independent Auditors Are Required