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15 Cards in this Set
- Front
- Back
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Auditor's basic responsibilities to detect illegal acts are about the same as for fraud. T or F
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True
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What is the AU and SAS No for Detecting Illegal Acts
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AU317 and SAS 54
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What is the title for AU317 and SAS 54?
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Illegal Acts by Clients
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In the planning stage of an audit, what are the auditor's responsibilities to detect illegal acts?
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A. Must design the audit to provide "reasonable assurance" of detecting illegal acts having a direct and material effect on the financial statements (e.g., illegalities related to compliance with applicable securities laws).
B. The auditor is less likely to detect acts relating to the entity's operating activities, rather than financial reporting activities (for example, the auditor might not be the mostly likely party to detect illegal disposals of hazardous waste materials). |
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In the field work stage of an audit, what are the auditor's responsibilities to detect illegal acts?
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Make inquiries of management about the entity's compliance with applicable laws and their knowledge of any such illegal acts having financial statement consequences (include reference in the "management representation letter" at the end of field work).
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Auditor's basic responsibilities to detect illegal acts are about the same as for fraud. T or F
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True
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What is the AU and SAS No for Detecting Illegal Acts
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AU317 and SAS 54
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|
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What is the title for AU317 and SAS 54?
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Illegal Acts by Clients
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|
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In the planning stage of an audit, what are the auditor's responsibilities to detect illegal acts?
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A. Must design the audit to provide "reasonable assurance" of detecting illegal acts having a direct and material effect on the financial statements (e.g., illegalities related to compliance with applicable securities laws).
B. The auditor is less likely to detect acts relating to the entity's operating activities, rather than financial reporting activities (for example, the auditor might not be the mostly likely party to detect illegal disposals of hazardous waste materials). |
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In the field work stage of an audit, what are the auditor's responsibilities to detect illegal acts?
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Make inquiries of management about the entity's compliance with applicable laws and their knowledge of any such illegal acts having financial statement consequences (include reference in the "management representation letter" at the end of field work).
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What must the auditor do if he determines that an illegal act may have occurred?
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A. Gather additional evidence to determine the facts -- about the nature and financial statement effect of any such illegal acts.
B. Discuss with the appropriate level of management (at least one level above those believed to be involved) and those charged with governance. C. May have to consult with client's attorney or other specialists, since determination of illegality is usually outside of auditor's expertise. D. Consider implications to other audit areas -- for example, does such an act reflect on management's integrity? |
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What are the Reporting effects of detected illegal acts?
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A. Ask management to revise the financial statements appropriately; if management will not make required adjustments, the auditor should appropriately modify the opinion (due to GAAP departure).
B. If unable to determine the magnitude of the misstatement, the auditor may have to disclaim or qualify the opinion (due to scope limitation). C. Inform management and those charged with governance, but not outside authorities due to confidentiality (prohibits "whistle-blowing" -- same "exceptions" as for disclosing fraud). |
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If management will not make required adjustments due to illegal acts, what is the auditor's option?
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Modify the opinion due to GAAP departure
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If auditor is unable to determine the magnitude of the misstatement, due to illegal acts, what is the auditor's option?
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Disclaim or Qualify the opinion due to scope limitation
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Can the auditor inform outside authorities of illegal acts found in the financial statements?
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No, due to confidentiality. A prohibition of whistle-blowing
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