The auditor is concerned about the client's compliance with laws and regulations that have an indirect impact on the financial statements.Because of the inherent limitations of an audit,there is an unavoidable risk that some material misstatements in the financial statements may be undetected.This risk is greater related to potential violations of laws and regulations for which of the following reasons?
A)many government contracts refer to a specific set of regulations
B)many government programs are subject to state and federal laws
C)many laws and regulations do not affect the financial statements
D)noncompliance may involve conduct designed to reveal the noncompliance
E)whether an action constitutes noncompliance is a matter for determination in a court of law
F)both A and B
G)both C and E
H)both D and E

Question

Quizplus · Accepted Answer

Many laws and regulations do not have a direct impact on the financial statements, and whether an action constitutes noncompliance is a matter for determination in a court of law. Therefore, noncompliance with these types of laws and regulations may be more difficult for the auditor to detect during the audit, resulting in a greater risk of undetected material misstatements in the financial statements.

The Auditor Is Concerned About the Client's Compliance with Laws