If specific information comes to an auditor’s attention that implies the existence of possible illegal acts that could have a material, but indirect effect on the financial statements, the auditor should next
a. Apply audit procedures specifically directed to ascertaining whether an illegal act has occurred.
b. Seek the advice of an informed expert qualified to practice law as to possible contingent liabilities.
c. Report the matter to an appropriate level of management at least one level above those involved.
d. Discuss the evidence with the client’s audit committee, or others with equivalent authority and responsibility.
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