When auditors become aware of noncompliance with a law or regulation committed by client personnel, the primary reason that the auditors should obtain a better understanding of the nature of the act is to
a. determine whether to contact law enforcement officials
b. recommend remedial actions to the audit committee
c. evaluate the effect of the noncompliance on the financial statements
d. determine whether other similar acts could have occurred
Answer: c. evaluate the effect of the noncompliance on the financial statements
Auditors perform analytical procedures in the planning stage of an audit for the purpose of
a. identifying unusual conditions that deserve more auditing effort
b. determining which of the financial statement assertions are the most important for the client's financial statements
c. determining the nature, timing, and extent of audit procedures for auditing the inventory
d. deciding that matters to cover in an engagement letter
Answer: a. identifying unusual conditions that deserve more auditing effort
Which of the following statements best describes auditors' responsibility for detecting a client's noncompliance with a law or regulation?
a. auditors must design tests to detect all noncompliance that directly affects the financial statements
b. auditors must design tests to obtain reasonable assurance that all noncompliance with direct material statement effects is detected
c. the responsibility for detecting noncompliance exactly parallels the responsibilities for errors and fraud
d. auditors must design tests to detect all material noncompliance that indirectly affects the financial statements
Answer: b. auditors must design tests to obtain reasonable assurance that all noncompliance with direct material statement effects is detected
