Question

Which of the following statements concerning auditor identification of client noncompliance with laws is correct?

a.An auditor's responsibility to detect noncompliance with laws that have an indirect and effect on the
financial statements differs from that for laws that have a direct effect.
b.An audit in accordance with generally accepted auditing standards normally includes highly effective
special substantive audit procedures specially designed to detect noncompliance with laws that have an
indirect but immaterial effect on the financial statements.
c.An auditor considers compliance with laws from the perspective of the reliability of management's
representations rather than their relation to audit objectives derived from financial statement assertions.
d.An auditor has no responsibility to detect client noncompliance with laws that have a direct effect on the
financial statements.

Answer 1

An auditor's responsibility to detect client noncompliance with laws may vary depending on whether the law has a direct or indirect effect on the financial statements.

Step-by-step explanation:

In the identification of client noncompliance with laws, an auditor's responsibility may vary depending on the nature of the laws. Generally, an auditor is responsible for detecting noncompliance with laws that have a direct effect on the financial statements. This means that if a law directly impacts the financial statements, the auditor has a responsibility to detect any noncompliance.

On the other hand, if a law has an indirect effect on the financial statements, the auditor's responsibility may differ. However, the auditor still has a duty to perform procedures to assess the risk of noncompliance and obtain sufficient evidence to ensure that the financial statements are not materially misstated due to noncompliance with such laws.

Therefore, statement (a) is correct: an auditor's responsibility to detect noncompliance differs depending on whether the law has a direct or indirect effect on the financial statements.