ICANBusiness, Management and FinanceBusiness Ethics and Corporate Social Responsibility2022

A company's auditor discovers that management has deliberately understated an environmental liability of ₦25,000,000 in the financial statements to avoid negative publicity about a pollution incident. Under ISA 250 (Consideration of Laws and Regulations in an Audit of Financial Statements), what is the auditor's PRIMARY responsibility?

AImmediately resign from the engagement to avoid association with the misstatement
BConsider the implications for the audit report and communicate the matter to those charged with governanceCORRECT
CReport the matter directly to the Nigerian Environmental Standards and Regulations Enforcement Agency (NESREA)
DQuantify the penalty under the Environmental Impact Assessment Act and include it in the audit report
AI
Toaster Teacher
Why the answer is B, and why the others tempt you.
ISA 250 requires the auditor to consider the implications of identified or suspected non-compliance with laws and regulations for the audit, including its effect on the financial statements, and to communicate the matter to those charged with governance. Direct reporting to a regulatory authority is generally not the auditor's primary duty unless required by specific legislation or where governance communication is futile. Immediate resignation without following due process is not prescribed as the primary response.
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