CPA · Question 78 · Area I: Ethics & General Principles
An auditor is performing an audit of an issuer. The auditor discovers an illegal act (noncompliance with laws and regulations) that has a material effect on the financial statements. Management and the Audit Committee have failed to take appropriate remedial action. Under Section 10A of the Securities Exchange Act of 1934, what is the auditor's required next step?
Answer options:
Immediately resign from the engagement.
Report the matter to the Board of Directors; if the Board does not notify the SEC within one business day, the auditor must resign or notify the SEC.
Notify the IRS immediately.
Issue an adverse opinion.
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