Today's question: AUD

In reporting on compliance with laws and regulations during a financial statement audit in accordance with Government Auditing Standards, an auditor should include in the auditor's report:

A)     A statement of assurance that all controls over fraud and illegal acts were tested

B)     Material instances of fraud and illegal acts that were discovered

C)     The materiality criteria used by the auditor in considering whether instances of noncompliance were significant

D)    An opinion on whether compliance with laws and regulations affected the entity's goals and objectives

C

Correct Answer: B

Explanation: Government Auditing Standards include additional reporting standards for financial statement audits. One of those standards requires that the report on the financial statements describe the scope of the auditors' testing of compliance with laws and regulations and internal controls and present the results of those tests. The standard goes on to state that in presenting the results of those tests, auditors should report irregularities, illegal acts, and other material noncompliance. Discoveries of fraud, which is a type of illegal act involving the obtaining of something of value through willful misrepresentation, would also be reported.

The remaining answer choices are incorrect for the following reasons:

• The auditor does not test all controls.
• Materiality criteria are not specified in the auditor's report.
• Affects of compliance on an entity's goals and objectives, which relate more to performance audits than to financial audits, would not be included in the auditor's report.

Today’s question: REG

A plaintiff wishes to recover damages from the issuer for losses resulting from material misstatements in a securities registration statement. In order to be successful, one of the elements the plaintiff must prove is that the _________________

A)     plaintiff was in privity of contract with the issuer or that the issuer knew of the plaintiff.

B)     plaintiff acquired the securities.

C)     issuer acted negligently.

D)    issuer acted fraudulently.