@Nam
When in doubt- look it up in the authoritative literature. If you are using Wiley you will find it at the end of the book.
AU §317Illegal Acts by Clients
Effect on the Auditor’s Report
.18 If the auditor concludes that an illegal act has a material effect on
the financial statements, and the act has not been properly accounted for or
disclosed, the auditor should express a qualified opinion or an adverse opinion
on the financial statements taken as a whole, depending on the materiality of
the effect on the financial statements.
.19 If the auditor is precluded by the client from obtaining sufficient appropriate
audit evidence to evaluate whether an illegal act that could be material
to the financial statements has, or is likely to have, occurred, the auditor generally
should disclaim an opinion on the financial statements. [Revised, March
2006, to reflect conforming changes necessary due to the issuance of Statement
on Auditing Standards No. 105.]
.20 If the client refuses to accept the auditor's report as modified for the
circumstances described in paragraphs .18 and .19, the auditor should withdraw
from the engagement and indicate the reasons for withdrawal in writing
to those charged with governance. [Revised, April 2007, to reflect conforming
changes necessary due to the issuance of Statement on Auditing Standards
No. 114.]
.21 The auditor may be unable to determine whether an act is illegal
because of limitations imposed by the circumstances rather than by the client
or because of uncertainty associated with interpretation of applicable laws or
regulations or surrounding facts. In these circumstances, the auditor should
consider the effect on his report.2
So Nam- what do you think now?
FAR Passed 5/28/14
AUD Passed 1/22/13
BEC Passed 7/12/13
REG Passed 5/9/14
Virginia CPA license issued July 2014
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