What is the duty of an independent public accountant if, in the course of an audit, the accountant detects information indicating that an illegal act has or may have occurred?
The accountant must (1) determine whether it is likely that an illegal act has occurred and, if so, determine and consider the possible effect on the financial statements; and (2) inform the appropriate level of the management of the company. The accountant must ensure that the audit committee, or the board of directors in the absence of such a committee, is adequately informed with respect to the illegal acts, unless the illegal act is clearly inconsequential. If after informing the audit committee or board in the absence of an audit committee, the accountant concludes that (1) the illegal act has a material effect on the financial statements of the company, (2) senior management has not taken timely and appropriate remedial actions with respect to the illegal act, and (3) the failure to take remedial action is reasonably expected to warrant departure from a standard audit report or resignation, then the accountant must, as soon as practicable, directly report his or her conclusions to the full board of directors. The board is then required to notify the SEC within one business day after its receipt of the report. If the board fails to do so, the accountant must furnish the SEC a copy of its report (or the documentation of any oral report given).
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Answer the following statement true (T) or false (F)
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