Question

The disclosure of fraud to parties other than the entity's senior management and its audit committee ordinarily would be precluded by the auditor's ethical or legal obligations of confidentiality. However, the auditor has a duty to disclose the information to parties outside the entity in all of the following circumstances except:

A) A court subpoena in conjunction with a fraud investigation.
B) A successor auditor makes inquiries in determining whether to accept the engagement.
C) A Wall Street analyst inquiry regarding future profit projections.
D) To comply with legal or regulatory requirements.

Answer 1

The auditor has a duty to disclose fraud information to parties outside the entity in certain circumstances, except for when responding to a Wall Street analyst inquiry regarding future profit projections. Option C is correct.

Step-by-step explanation:

The auditor has a duty to disclose information to parties outside the entity in all of the following circumstances except for answering A Wall Street analyst inquiry regarding future profit projections. The auditor's ethical or legal obligations of confidentiality generally preclude the disclosure of fraud to parties other than the entity's senior management and its audit committee.

However, in the other three circumstances mentioned, such as answering a court subpoena in conjunction with a fraud investigation, assisting a successor auditor in determining whether to accept the engagement, or complying with legal or regulatory requirements, the auditor has a duty to disclose the information to parties outside the entity.