Final answer:
The GAAS section that details how auditors should address noncompliance with laws and regulations is AU Section 250. This section outlines auditor responsibilities and procedures to detect material noncompliance that affects financial statements.
Step-by-step explanation:
The section of the Generally Accepted Auditing Standards (GAAS) that defines noncompliance with laws and regulations is known as the AU Section 250, Consideration of Laws and Regulations in an Audit of Financial Statements.
When a CPA encounters an issue with a client regarding noncompliance, such as a failure to pay a fine, the auditor must assess the implications for the financial statements, including disclosures, and consider the effect on the auditor's opinion. The standards require the auditor to design procedures to provide reasonable assurance that noncompliance with laws and regulations that could materially affect the financial statements will be detected.
Auditors are not responsible for preventing noncompliance, but they are required to consider the risk of material misstatement due to noncompliance. It is essential for auditors to be diligent in identifying instances of noncompliance that could impact financial reporting or bring into question the entity's ability to continue as a going concern. In such cases, the auditor must discuss the matter with management, and possibly those charged with governance, and consider the need to report the finding in accordance with the auditing standards.