The auditor is not concerned with illegal acts of clients because such acts are not within the scope of financial statement reporting.

Question

Quizplus · Accepted Answer

Auditors are required to obtain reasonable assurance that the financial statements are free from material misstatements, whether caused by error or fraud. Illegal acts by clients may give rise to material misstatements in financial statements and therefore, auditors are required to obtain an understanding of the entity's compliance with laws and regulations that have a direct effect on the financial statements. Furthermore, auditors have a responsibility to report illegal acts to an appropriate authority if they have a direct material effect on the financial statements.

The Auditor Is Not Concerned with Illegal Acts of Clients