the auditor's responsibility.docx

8/15/2019 The Auditor's Responsibility.docx

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1. Material misstatements may emanate from all of the following except.a. fraudb. errorc. Noncompliance with laws and regulationsd. Inadequacy of accounting records.

2. The level of assurance provided by an audit of detecting a material misstatement is referred to asa. !easonable assuranceb. Moderate assurances

c. "bsolute assuranced. Negative assurance

#. "n intentional act by one or more individuals among management$ employees$ or third parties which

results in misrepresentation of %nancial statements refers toa. &rror c. 'raudb. Noncompliance d. Illegal acts

(. In the context of %nancial statement presentation$ fraud occurs whena. " misstatement is made and there is both )nowledge of its falsity and the intent to deceive.b. " misstatement is made and there is )nowledge of its falsity but no intent to deceive.c. The auditor fails to comply with *+".d. The auditor has an absence of reasonable care in the performance of the audit.

,. The responsibility for the detection and prevention of errors$ fraud and noncompliance with laws and

regulations rests witha. "uditor c. client managementb. -lients legal counsel d. internal auditor

/. The responsibility of adopting sound accounting policies$ maintaining adequate internal control$ and

ma)ing fair representation in the %nancial statement restsa. 0ith the managementb. 0ith the independent auditorc. &qually with management and the auditord. 0ith the internal audit department

. The management responsibility to detect and prevent fraud end error is accomplished bya. Implementing adequate quality controlb. aving an annual audit of %nancial statementsc. Implementing adequate accounting and internal control systemd. Issuing a representation letter to the auditor

3. 0hich of the following statements best describes the auditors responsibility regarding the detection of

materials errors and frauds4a. The auditor is responsible for the failure to detect material errors and frauds only when such failure

results from the misapplication of *+".b. The audit should be designed to provide reasonable assurance the material errors and frauds will be

detected

c. The auditor is responsible for the failure to detect material errors and fraud only when the auditor failsto con%rm receivables or observe inventories.

d. &xtended auditing procedures are required to detect unrecorded transactions even if there is no

evidence that material errors and frauds may exist.5. The auditors best defense when material misstatements in the %nancial statements are not uncovered in

the audit is thata. The audit was conducted in accordance with generally accepted accounting principles.b. -lient is guilty of contributory negligencec. The audit was conducted in accordance with *+".d. The %nancial statements are clients responsibility

16. 0hich is the following is most correct regarding the distinction7s8 between the auditors responsibilities for

searching for errors and fraudsa. 9ittleb. " signi%cantc. Nod. :arious

11. The following statements relate to the auditors responsibility for the detection of errors and fraud. Identify

the correct statements.I. ;ue to the inherent limitations of the audit$ there is a possibility that material

misstatements in the %nancial statements may not be detectedII. The subsequent discovery of material misstatement of the %nancial information resulting

from fraud or error does not$ in itself$ indicate that the auditor failed to follow the basic

principles and procedures of an audit.a. I onlyb. II onlyc. <oth statements are correctd. <oth statements are incorrect



12. The auditors responsibility for failure to detect fraud arisesa. 0hen the failure clearly results from non=compliance to *+"b. 0henever the amounts involved are materialc. >nly when the examination was specially designed to detect fraudd. >nly when such failure clearly results from negligence so gross as to sustain an inference of fraud on

the part of the auditor1#. 0hich of the following statements is correct regarding errors and fraud4

a. "n error is unintentional$ whereas fraud is intentional

b. 'rauds occur more often than errors in %nancial statementsc. &rrors are always fraud and frauds are always errorsd. "uditors have more responsibility for %nding fraud than errors

1(. The primary factor that distinguishes errors from frauds isa. 0hether the underlying cause of misstatement relates to misapplication of accounting principles or to

clerical processingb. 0hether the misstatement is perpetrated by an employee or by a member of managementc. 0hether the misstatement is concealedd. 0hether the underlying cause of misstatement is intentional or unintentional

1,. The term ?error@ refers to unintentional misrepresentation of %nancial information. &xamples of errors are

whenI. "ssets have been misappropriatedII. Transactions without substance have been recordedIII. !ecords and documents have been manipulated and falsi%edI:. The eAects of the transactions have been omitted from the records

a. "ll of the above statements are true

b. >nly statements I and III are truec. "ll of the above are falsed. >nly statements II and I: are true

1/. 0hich of the following is an example of an error4a. ;efalcationb. +uppression or omission of the eAects of transactions from the records or documentsc. !ecording of transactions without substanced. Misapplication of accounting policies

1. 0hich of the following is an ?error@ as distinguished from ?fraud@a. &mbeBBlement of companys furidb. 0indow dressingc. -lerical mista)es in the processing of transactionsd. 9apping

13. 0hich of the following could be an example of fraud4a. Mista)es in the application of the accounting principlesb. -lerical errors in accounting data underlying the %nancial statements

c. Misinterpretation of facts that existed when %nancial statements were preparedd. Misappropriation of assets or group of assets15. 0hich of the following statements best identi%es the two types of fraud4

a. Theft of assets and employee fraudb. Misappropriation of asset and defalcationc. Management fraud and employee fraudd. 'raudulent %nancial reporting and management fraud

26. 'raudulent %nancial reporting is often calleda. Management fraudb. ;efalcationc. Misappropriation of assetsd. &mployee fraud

21. 0hich of the following is an example of fraudulent %nancial reporting4a. -ompany management changes inventory count tags and overstates ending inventory$ while

understanding cost of goods soldb. The treasurer diverts customer payments to his personal due$ concealing his actions by debiting an

expense account$ thus overstating expenses.c. "n employee steals small tools from the company and neglects to return themC the cost is reported as

a miscellaneous operating expensed. "n employee omitted an entry to record a ban) transfer to cover a cash shortage.

22. 'raudulent %nancial reporting is most li)ely to be committed by whom4a. 9ine employees of the entityb. >utside members of the entitys board of directorsc. &ntitys managementd. The entitys auditors

2#. 0hich one of the following terms relates to the embeBBling of receipts4a. Manipulationb. Misrepresentation



b. The responsibility for the prevention and detection of fraud and error rests with managementc. The auditor should plan and perform the audit with an attitude of professional s)epticism$ recogniBing

that conditions or events may be found that fraud or error may existd. The li)elihood of detecting fraud is ordinarily higher than that of detecting error

#,. In performing a %nancial statement audit$ which of the following would an auditor least li)ely consider4a. Internal controlb. -ompliance with *'!+c. uality of managements business decision s

d. 'airness of the %nancial statement amounts#/. 0hich of the following is not an assurance that the auditors give to the parties who rely on the %nancial

statements4a. "uditors )now how the amounts and disclosures in the %nancial statements were producedb. "uditors give assurance that the %nancial statements are accuratec. "uditors gathered enough evidence to provide a reasonable basis for performing an opinionDd. If the evidence allows the auditors to do so$ auditors give assurance in the form of opinion$ as to

whether the %nancial statements ta)en as a whole are fairly presented in conformity with *'!+#. The ris) of not detecting material misstatement resulting from fraud is greater than the ris) of not

detecting a material misstatement arising from error$ becausea. The auditor designs only procedures to detect material error but no procedures are designed to detect

material fraudb. 'raud ordinarily involves acts designed conceal it$ such as collusion$ forgery$ or deliberate failure to

record transactionsc. The professional standards do not require the auditor to discover information that is indicative of fraudd. It is the responsibility of the management to detect fraud and auditors responsibility is con%ned only

to the detection of material errors#3. 0hen performing a %nancial statement audit$ auditors are required to explicitly assess the ris) of material

misstatement due toa. &rrorsb. 'raudc. Noncomplianced. <usiness ris)

#5. "udits of %nancial statements are designed to obtain assurance of detecting misstatement due to

&rrors 'raudulent Misappropriation

%nancial reporting of assetsa. J&+ J&+ J&+b. J&+ J&+ N>c. J&+ N> J&+d. N> J&+ N>

(6. 0hich of the following best describes what is meant by the term ?fraud ris) factor@

a. 'actor whose presence indicates that the ris) of fraud is highb. 'actor whose presence often has been observed in circumstances where fraud has occurredc. 'actor whose presence requires modi%cation of planned audit proceduresd. 'actor that indicates internal control wea)nesses

(1. "t which stage7s8 of the audit may fraud ris) factors be identi%ed4

*lanning >btaining -onducting

Fnderstanding %eldwor)a. J&+ J&+ J&+b. J&+ J&+ N>c. J&+ N> N>d. N> J&+ J&+

(2. 0hich of the following is a category of ris) factors that should be considered when assessing ris) of

misstatements arising from misappropriation of assets4a. -ondition of internal controlb. Management characteristicsc. 'inancial stability of the entity industry condition

(#. 0hen considering fraud ris) factors relating to managements characteristics$ which of the following isleast li)ely to indicate a ris) of possible misstatements due to fraud4a. 'ailure to correct )nown material internal control wea)nesses on timely basisb. Non%nancial managements preoccupation with the selection of accounting principlesc. signi%cant portion of managements compensation represented by bonuses based upon achieving

unduly aggressive operating resultsd. Fse of unusually conservative accounting practices

((. 0hich of the following is most li)ely to be a response to the auditors assessment that the ris) of material

misstatement due to fraud for the existence of inventory is high4a. >bserve test counts of inventory at certain locations on an unannounced basisb. *erform analytical procedures rather than ta)ing test counts.



c. !equest that inventories be counted prior to year end.d. !equest that inventory counts at the various locations be counted on diAerent dates so as to allow the

same auditor to be present at every count(,. 0hich of the following characteristics most li)ely would heighten an auditors concern about the ris) of

intentional manipulation of %nancial statements4a. Turnover of senior accounting personnel is lowb. Insiders recently purchased additional shares of the entitys stoc)c. Management places substantial emphasis on meeting earnings proKections

d. The rate of change in the entitys industry is slow(/. Individuals who commit fraud are ordinarily able to rationaliBe the act and also have an

Incentive >pportunity

a. Jes Jesb. Jes Noc. No Jesd. No No

(. 0hich of the following most li)ely to be considered a ris) factor relating to fraudulent %nancial reporting4a. ;omination of management by top executivesb. 9arge amount of cash processedc. Negative cash Lows from operationsd. +mall high=peso inventory items

(3. 0hich of the following is most li)ely to be presumed to represent fraud ris) on an audit4a. -apitaliBation of repairs and maintenance into the property$ plant and equipment asset accountb. Improper revenue recognitionc. Improper interest expense accrual

d. Introduction of signi%cant new products(5. 0hich of the following conditions or events would least li)ely increase the ris) of fraud or error4

a. uestions with respect to competence or integrity of managementb. Fnusual pressures within the entityc. Fnusual transactionsd. 9ac) of transaction trail

,6. 0hich of the following conditions identi%ed during %eldwor) of an audit is most li)ely to aAect the auditors

assessment of the ris) of misstatement due to fraud4a. -hec)s for signi%cant amounts outstanding at year endb. -omputer generated documentsc. Missing documentsd. Jear=end adKusting Kournal entries

,1. 0hich of the following would be least li)ely to suggest to an auditor that the clients statements are

materially misstated4a. There are numerous delays in preparing timely internal %nancial reportsb. Management does not correct material internal control wea)ness that it )nows about

c. ;iAerences are reLected in the customers con%rmation repliesd. There have been two new controllers this year

,2. 0hich of the following circumstances would least li)ely cause an auditor to consider whether material

misstatement exist in an entitys %nancial statements4Ca. Management is dominated by several individualsb. The industry in which the entity operates is decliningc. There is inadequate wor)ing capital due to declining pro%td. +upporting records that should be readily available are frequently not produced when requested

,#. 0hich of the following circumstances would least li)ely cause an auditor to consider whether a material

misstatement exists4a. The turnover of senior accounting personnel is exceptionally lowb. Management places substantial emphasis on meeting earning proKectionsc. There are signi%cant unusual transactions near year=endd. >perating and %nancing decisions are dominated by one person

,(. 0hich of the following circumstances most li)ely would cause an auditor to believe that material

misstatements exist in an entitys %nancial statement4

a. >perating and %nancing decisions are dominated by top managementb. "udit trials of computer=generated transactions exist only for a short period of timec. The chief %nancial oEcer does not sign the management representation letter until the last day of the

auditors %eldwor)d. There were substantial payments for services that appear excessive in relation to services provided

,,. 0hich of the following conditions would not normally cause the auditor to question whether material errors

or possible fraud exists4a. The accounting department is overstaAedb. ;iAerences exist between control accounts and supporting subsidiary recordsc. Transactions are not supported by proper documentationd. There are frequent changes of auditors and lawyers



,/. 0hich of the following characteristics most li)ely would heighten an auditors concern about the ris) of

material misstatements in an auditors %nancial statements4a. The entitys industry is experiencing declining customer demandb. The rate of change in the entitys industry is slowc. <an) reconciliation statements usually include in=transit depositsd. &quipment is often sold at a loss before being fully depreciated

,. 0hich of the following conditions or events increase the ris) of error or fraud4a. Management is dominated by several individuals

b. There are frequent changes of auditors or legal counselc. There is a signi%cantly low turnover of senior accounting personneld. The entity does not correct internal control de%ciencies that it )nows about

,3. "ll of the following conditions are indicators of possible pressures on an entity excepta. The industry in which the entity operates is decliningb. There is inadequate wor)ing capital due to declining pro%ts or too rapid expansionc. The client is heavily dependent on one or a few products or customersd. There is a signi%cant and prolonged understaEng of the accounting department

,5. 0hich of the following is most li)ely to be an overall response to fraud ris) identi%ed in an audit4a. +upervise members of the audit team less closely and rely more upon Kudgmentb. Fse less predictable audit proceduresc. >nly use certi%ed public accountants on the engagementd. *lace increased emphasis on the audit of obKective transactions rather than subKective transactions

/6. ;uring the course of an audit engagement$ the -*" discovers speci%c circumstances that led him to the

belief that employee fraud that has a material eAect on the %nancial statements may have occurred. In

such a case the -*" should

a. Tract fully approach the suspected employee and attempt to resolve the matter with himb. "scertain that the client understand that the ordinary examination is not primarily designed to

disclose fraud or defalcationsc. *erform appropriate modi%ed or additional procedures to con%rm or dispel the auditors suspiciond. "fter advising the client of his %ndings suggest that an investigation be made to discover whether

fraud has in fact occurred/1. If an auditor believes that material errors or fraud exist$ the auditor should

a. -onsider the implications and discuss the matter with appropriate levels of managementb. Ma)e the investigation necessary to determine whether errors or fraud have in fact occurredc. !equest that management investigate whether errors or fraud have in fact occurredd. -onsider whether errors or fraud were the result of employees failure to comply with speci%c controls

/2. 0hen the auditor believes a misstatement is or may be the result of the fraud but that the eAect of the

misstatements is not material to the %nancial statements$ which of the following steps is required4a. -onsider the implications for other aspects of the auditb. !esign from the auditc. -ommence a fraud examination

d. -ontact regulatory authorities/#. 0hich of the following is an incorrect statement4

a. The auditor cannot assume that fraud or error is an isolated occurrence unless there is an evidence to

the contraryb. If the auditor suspects that error may exist$ he should immediately communicate it to the

management even if the potential eAect on %nancial statements is immaterialc. 'raud and error should be reported to a level of management at least one level above those involvedd. Normally$ the -*" does not have any responsibility con%dential information noted during the audit to

the regulatory authorities/(. If the auditor believes that the fraud or error has a material eAect on the %nancial statements but the

client is not willing to correct the misstatement$ the auditor would most li)ely issue a7n8a. Fnmodi%ed reportb. uali%ed or adverse opinionc. uali%ed or disclaimer of opiniond. Fnmodi%ed opinion with emphasis of matter paragraph

/,. If the auditor is precluded by the entity from obtaining evidence to evaluate whether fraud or error that

may be material to that %nancial statements has occurred$ the auditor should issue a report that containsa. "n adverse opinionb. "n unmodi%ed opinionc. &ither quali%ed or adverse opiniond. &ither quali%ed opinion or a disclaimer of opinion

//. 0hen a user sees that a unmodi%ed opinion has been expressed by an external auditor$ he or she may

correctly infer thata. No material errors were found during the engagementb. No embeBBlements remain undetectedc. "ny system defects encountered during the engagement have been corrected to the auditors

satisfaction



d. "ny diAerences between management and the auditor on accounting matters have been resolved to

the auditors satisfaction/. 0hen comparing the auditors responsibility for detecting employee fraud and for detecting errors$ the

profession has placed the responsibilitya. More on discovering errors than employee fraudb. More on discovering employee fraud than errorsc. &qually on discovering either oned. >n the senior auditor for detecting errors and on the manager for detecting employee fraud

/3. udgments about the increased ris) of misstatement of the %nancial statements due to fraud may inLuencethe auditors professional Kudgments in the following ways excepta. The auditors ability to assess control ris) below the maximum may be reduced and the auditor should

be sensitive to the ability of management to override controlsb. The audit team may be selected in ways that ensure that the )nowledge$ s)ill$ and ability of personnel

assigned signi%cant engagement responsibilities are commensurate with the auditors assessment of

the level of ris)c. The auditor should plan and audit to provide a guarantee that the %nancial statements are free of

material misstatements$ whether due to fraud or errord. The audit team may approach the audit with a heighten level of professional s)epticism

/5. 0hat is an auditors responsibility who discovers that management is involved in a potentially immaterial

fraud4a. !eport the fraud to the audit committeeb. !eport the fraud to the +&-c. !eport the fraud to a level of management at least one level below those involved in the fraud

d. ;etermine that the amounts involved are immaterial$ and if so$ there is no reporting responsibility6. 0hich of the following statements best describes the auditors responsibility regarding the detection of

fraud4a. The auditor is responsible for the failure to detect fraud only when such failure clearly results from non

performance of audit procedures speci%cally described in the engagement letterb. The auditor is required to provide reasonable assurance that the both material errors and fraud are

detectedc. The auditor is not and cannot be held responsible for the detection of fraud and errord. The auditor is responsible for the failure to detect fraud only when an unmodi%ed opinion is issued

1. The auditors evaluation of the li)elihood of material employee fraud is normally done initially as a part of a. Tests of controlsb. Tests of transactionsc. Fnderstanding the entitys internal controld. The assessment of whether to accept the audit engagement

2. "n auditor should recogniBe that the application of auditing procedures may produce evidence indicating

the possibility of errors or fraud and therefore should

a. *lan and perform the engagement with an attitude of professional s)epticismb. Not rely on internal controls that are designed to prevent or detect errors or fraudc. ;esign audit tests to detect unrecorded transactionsd. &xtend the wor) to audit most recorded transactions and records of an entity

#. These are acts of omissions or commissions by the entity being audited$ either intentional or unintentional$

which are contrary to the prevailing laws and regulationsa. 'raudb. Misappropriationc. Noncomplianced. ;efalcation

(. Most noncompliance aAect the %nancial statementsa. ;irectlyb. >nly indirectlyc. <oth directly and indirectlyd. Materially if directC immaterially if indirect

,. 0hen then auditor )nows that a noncompliance with laws and regulation has occurred$ the auditor must

a. Issue an adverse opinionb. 0ithdraw from the engagementc. -onsider the eAects on the %nancial statements$ including the adequacy of disclosured. !eport the matter to the proper government authorities

/. Generally the decision to notify parties outside the clients organiBation regarding noncompliance with laws

and regulations is the responsibility of thea. Independent auditorb. -lients legal counselc. Managementd. Internal auditors

. 0hich of the following is the auditor least li)ely to do when aware of a noncompliancea. ;iscuss the matter with the clients legal counsel



b. >btain evidence about the potential eAect of the noncompliance on the %nancial statementsc. -ontact the local law enforcement oEcials regarding potential criminal wrongdoingd. -onsider the impact of the noncompliance on the relationship with the companys management

3. 0hich of the following statements about noncompliance is incorrect4a. "n audit in accordance with *+" cannot be expected all noncompliance with laws and regulationsb. It is managements responsibility to ensure that entitys operations are conducted in accordance with

laws and regulationsc. "n auditor cannot be held responsible for preventing noncompliance

d. The determination of whether a particular act constitutes noncompliance is ultimately based on the Kudgment of the auditor

5. 0hich of the following circumstances is not an indication of possible noncompliance4a. *ayment of %nes or penaltiesb. *ayment for unspeci%ed services to consultants$ related parties$ or government employeesc. *urchasing at prices signi%cantly above or below mar)et priced. *ayment for goods or services to the country from which the goods or services originated

36. 0hich of the following conditions would least li)ely indicate the occurrence of rioncompliance4a. Investigation by government agenciesb. *ayments without proper documentationc. *urchasing a real property for a price that is signi%cantly higher than the sellers boo) valued. &xistence of an accounting system which fails to provide an adequate audit trail or suEcient evidence

31. 0hich of the following conditions would most li)ely indicate a possible noncompliance with laws and

regulations4a. Media commentb. *urchasing land for a price signi%cantly diAerent from the sellers recorded amount

c. *ayment of commission to sales agentd. *ayment for speci%ed services to consultant

32. "ccording to *+"2,6$ the ris) of not detecting material misstatement due to noncompliance is high. This

can be attributed to all of the following factors$ excepta. There are many laws and regulations$ relating principally to the operating aspects of the entity$ that

typically do not have a materialC eAect on the %nancial statements.b. "uditors usually rely on lawyers representations to detect noncompliancec. The eAectiveness of audit procedures may be aAected by the limitations of the auditd. Noncompliance may involve conduct designed to conceal it

3#. 0hen the auditor becomes aware of information concerning a possible instance of noncompliance$ the

auditor shoulda. Notify the regulatory agenciesb. ;etermine who was responsible for the actc. >btain understanding of the nature of the act$ and the circumstances in which it has occurred and

suEcient other information to evaluate the possible eAect on the %nancial statementsd. Modify the opinion on the clients %nancial statements

3(. "n auditor who discovers that the client has not complied with laws and regulations that has a materialeAect on the %nancial statements most li)ely would withdraw from the engagement if thea. Noncompliance was a violation of *'!+b. -lient does not ta)e remedial action that the auditor considers necessaryc. Noncompliance was committed last year when %nancial statements were not auditedd. "uditor has already assessed control ris) at the maximum level

3,. If speci%c information comes to an auditors attention that implies an existence of noncompliance with

laws that could result in a material$ but indirect eAect on the %nancial statements$ the auditor should nexta. "pply audit procedures speci%cally directed to ascertaining whether noncompliance has occurredb. +ee) the advice of an informed expert quali%ed to practice law as to possible contingent liabilitiesc. !eport the matter to an appropriate level of management at least one level above those involvedd. ;iscuss the evidence with the clients audit committee$ or others with equivalent authority and

responsibility3/. 0hich of the following does not properly described a procedure that the auditor normally performs in

connection with noncompliance4a. The auditor should obtain a general understanding of legal and regulatory framewor) applicable to the

entityb. The auditor should perform procedures to identify instances of noncompliance with laws and

regulationsc. The auditors should obtain oral representation that management has disclosed to the auditor all

)nown actual or possible noncompliance with laws and regulationsd. The auditor should obtain suEcient appropriate evidence about compliance with laws and regulations

3. 0hich of the following procedures would an auditor be unli)ely to perform when obtaining a general

understanding about the laws and regulations aAecting the clients business4a. Inquire of management concerning the entitys policies and procedures regarding compliance with

laws and regulations



b. Inquire of management as to the laws or regulations that may be expected to have a fundamental

eAect on the operations of the entityc. ;iscuss with management the policies or procedures adopted for identifying$ evaluating and

accounting for litigation claims and assessmentsd. >btain a representation letter from the clients legal counsel

33. "fter obtaining suEcient level of understanding about the clients legal and regulatory framewor)$ the

auditor shoulda. ;evelop a code of conduct and ensure that these employees comply with such code

b. *erform procedures to help identify instance of noncompliance with laws and regulationsc. Monitor entitys legal requirements and ensure that operating procedures are designed to meet these

requirementsd. Inquire of management as to the laws or regulations that may ne expected to have a fundamental

eAect on the operations of the entity35. 0hich of the following procedures would assist the auditor in identifying noncompliance with laws and

regulations4a. Inquiring from the clients lawyersb. Inspecting correspondence with relevant regulatory agenciesc. Inquire of management concerning entitys policies and procedures regarding compliance with laws

and regulationsd. ;iscuss with the client management the policies or procedures adopted for identifying$ evaluating and

accounting for litigation$ claims and assessments56. If the client refuses to accept an audit report that is quali%ed due to noncompliance with laws and

regulations$ the auditor should

a. 0ith from the engagement and indicate the reasons to the audit committee in writingb. Issue an adverse opinion if management agrees to fully disclose the matterc. 0ithdraw from the engagement and indicate the reasons to the +&- or other regulatory body in

writingd. Issue a disclaimer of opinion instead

51. ;uring the annual audit of oax -orp.$ a publicly held company$ oy$ -*"$ a continuing auditor$ determined

that illegal political contributions had been made during each of the past seven years$ including the ear

under audit. oy noti%ed the board of directors about the illegal contributions$ but they refused to ta)e any

action because the amounts involved were immaterial to the %nancial statements. oy should reconsider

the intended degree of reliance to be placed on thea. 9etter of audit inquiry to the clients attorneyb. *rior years audit programsc. Management representation letterd. *reliminary Kudgment about materially levels

52. "n auditor who discovers that a clients employees have paid small bribes to public oEcials most li)ely

would withdraw from the engagement if thea. -lient receives %nancial assistance from various government agenciesb. &vidence that is necessary to p=rove that the illegal acts were committed does not existc. &mployees actions aAect the auditors ability to rely on managements representationsd. Notes to the %nancial statements fail to disclose the employees actions

the auditor's responsibility.docx

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