For laws with an indirect impact on the financial statements the auditor should perform audit procedures to identify instances on noncompliance with laws and regulations that may have a material effect on the financial statements.The auditor does this by
A)inquiring with management about the company's compliance with laws and regulations
B)reviewing regulations of relevant licensing or regulatory bodies
C)corresponding with relevant licensing or regulatory bodies
D)inspecting correspondence with relevant licensing or regulatory bodies
E)both A and B
F)both A and D
G)both C and E

Question

Quizplus · Accepted Answer

The best choice is both A and D as inquiring with management about the company's compliance with laws and regulations and inspecting correspondence with relevant licensing or regulatory bodies provide the auditor with relevant information on noncompliance with laws and regulations that may have a material effect on the financial statements. Reviewing regulations of relevant licensing or regulatory bodies and corresponding with relevant licensing or regulatory bodies may also be helpful but are not as effective as the other two choices.

For Laws with an Indirect Impact on the Financial Statements