The auditors who find that the client has committed an illegal act would be most likely to withdraw from the engagement when the:
A)Management fails to take appropriate corrective action.
B)Illegal act has material financial statement implications.
C)Illegal act has received widespread publicity.
D)Auditors cannot reasonably estimate the effect of the illegal act on the financial statements.

Question

Quizplus · Accepted Answer

Auditors are required to withdraw from the engagement if management fails to take appropriate corrective action after an illegal act has been identified. This signifies a lack of commitment to ethical and legal standards and shows that management is not taking responsibility for the illegal activity, which could undermine the auditor's independence and impair their ability to provide reliable and trustworthy information. In contrast, the materiality of the financial statement implications, the level of publicity, and the ability to reasonably estimate the effect of the illegal act should be considered when determining the scope and nature of the audit procedures, but they do not necessarily justify withdrawal from the engagement.

The Auditors Who Find That the Client Has Committed an Illegal