A CPA's audit client is a small charity which funds development projects in a small foreign country.Most of its donations come in the form of cash,with tax receipts issued to the donors.Included in the cash receipts are weekly donations by one person,Mr.X,whose last name is easily identifiable as coming from that foreign country.Some of these cash donations exceed $10,000.The CPA once asked about Mr.X and accepted as an answer that Mr.X was a wealthy entrepreneur but the CPA has done no other work.Which of the following statements is TRUE?

Question

Quizplus · Accepted Answer

The fact that Mr. X's donations frequently exceed $10,000 in cash and his last name identifies him as coming from the foreign country raises red flags of possible money laundering. Since the CPA has not done any further investigation into this matter, they may be considered willfully blind and complicit in an illegal act. Therefore, the CPA should perform further procedures to investigate the source of Mr. X's donations and report any suspicious activity to the appropriate authorities. Failure to do so could result in legal and ethical implications for the CPA.

A CPA's Audit Client Is a Small Charity Which Funds