Final answer:
Auditors are likely to withdraw from an engagement when they find that the client has committed an illegal act with a material effect on the financial statements and refuses to rectify the situation. The auditor's decision to withdraw is influenced by their professional and legal obligations to maintain integrity and comply with regulatory standards. Legal precedents like Strickland v. Washington and Padilla v. Kentucky highlight the importance of professionals' responsibilities in advising their clients adequately.
Step-by-step explanation:
The auditors who find that the client committed an illegal act would be most likely to withdraw from the engagement when the illegal act has a material effect on the financial statements and the client refuses to take appropriate action. The auditor's responsibility is to perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement, whether caused by error or fraud. However, when an auditor discovers an illegal act, they must consider the impact on the financial statements and also comply with legal and professional obligations, which may include reporting the act to appropriate authorities.
When facing such dilemmas, auditors are guided by professional standards and legal precedents, such as Strickland v. Washington, which outlines the standards for counsel performance in criminal defense, asserting that ineffectiveness can heavily influence the outcome of a case. Similarly, Padilla v. Kentucky reinforces the requirement for counsel to inform clients about the potential for deportation following criminal convictions. While these cases relate to counsel performance, they underscore the broader professional responsibility of staying informed and advising clients appropriately, which extends to auditors and their actions regarding discovered illegal acts.