ACCA Strategic Professional · Advanced Audit and Assurance (International) · Laws and regulations
Auditor Mariam finds that Tarn Logistics may have breached a law with only an indirect effect on the financial statements (health and safety). The breach may cause fines of $40,000, but management gave a plausible explanation that no breach occurred, supported by the legal counsel's letter. Overall materiality is $500,000. Which conclusion is most appropriate?
Mariam should assess the evidence, including the legal counsel's view, and if it shows no breach occurred, document her findings and conclusion without further action. A dispelled suspicion does not require regulator reporting, modification, or resignation, particularly with a small amount relative to materiality.
- AMariam must report the matter to the regulator regardless of the evidence
- BMariam should evaluate the evidence, including legal counsel's view, and, if satisfied no non-compliance occurred, no further action beyond documentation is requiredCorrect
- CThe audit opinion must be modified because any suspected breach is pervasive
- DMariam should resign since legal counsel was involved
Explanation
ISA 250 requires evaluating the evidence obtained and the implications. If sufficient appropriate evidence shows no non-compliance occurred, the auditor documents the findings and conclusions and needs no further reporting. The $40,000 is also well below materiality. Modification, reporting, or resignation are not triggered by a suspicion that is dispelled.
Did you get it right without looking?
One question tells you little. A timed set on Laws and regulations shows your real accuracy, how long you take and where you lose marks.
More Laws and regulations questions
- Delmar Pharma Ltd's auditor identifies a suspected breach of tax legislation that has an immaterial effect on the financial statements. Mana…
- While auditing Tessen Retail, the audit senior discovers that a purchasing manager has been paying small bribes to a supplier in breach of a…
- At the planning stage of the audit of Calloway Retail, the engagement partner is deciding what audit work ISA 250 (Revised) requires on laws…
- Aldous Retail's auditor identifies a non-compliance with tax regulations. Management has corrected it and paid the penalty, and the amount i…
- Orrin Logistics' auditor suspects the finance director has been involved in bribing a local official to win contracts, which may be a materi…
- Brandt & Co audits Solano Ltd. Solano's finance director tells the audit manager that a small, clearly inconsequential tax filing error occu…