During the audit of Brooklyn Oil Company,the engagement team discovers that Brooklyn has illegally buried 40,000 gallons of sludge in the field behind its factory.The auditors will assess Brooklyn's treatment of the illegality in the financial statements and related disclosures and possibly draw attention to it in the audit report.

Question

Quizplus · Accepted Answer

The auditors have a responsibility to assess the impact of the illegality on the financial statements and related disclosures, and to consider the need to draw attention to it in the audit report. Failure to do so could result in a failure to meet professional standards and legal requirements.

During the Audit of Brooklyn Oil Company,the Engagement Team Discovers