Question

While performing an audit of a public company, the auditors discovered material illegal acts and resigned due to the client's refusal to disclose them. The auditors' reason for resignation should be disclosed through which of the following?

1) CPA Direct Communication With Shareholders: The Process of Filing a Form 8-K
2) Yes : Yes
3) Yes : No
4) No : Yes
5) No : No

Answer 1

The auditors must file a Form 8-K to disclose their resignation reason, which aligns with corporate governance and the importance of transparency in public companies.

The auditors' reason for resignation after discovering material illegal acts and the client's refusal to disclose them should be communicated through the process of filing a Form 8-K. This action aligns with the principles of corporate governance and transparency. The Form 8-K is a report of unscheduled material events or corporate changes at a company that could be of importance to the shareholders or the Securities and Exchange Commission (SEC). In the context of public companies, transparency and disclosure are crucial to maintain the trust and confidence of investors, the public, and regulatory bodies.