What is Noncompliance with laws and regulations?
In short
An auditor's responsibility for an entity's compliance with laws depends on the law. For laws with a direct effect on financial statement amounts, such as tax laws, the auditor obtains evidence of compliance; for other laws, procedures are limited to inquiry and inspecting correspondence.
Key takeaways
- Other laws include environmental, workplace safety and licensing rules that can affect the business.
- Identified or suspected noncompliance is evaluated for its effect on the statements and communicated to those charged with governance.
- Serious cases may lead the auditor to withdraw or to consider whether to report outside the entity.
Where it's tested
AUD: Assessing Risk of Material Misstatement — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A client operates with weak segregation of duties over its cash disbursement process. All else equal, how should the auditor respond?