The first place the auditor in charge should go on arriving at a company is to visit the CEO. This is important to touch base with the CEO and get any comments the CEO may have. I know of one case where this visit provided the auditor some important information that would not be known for at least a month. The CEO admitted insider trading of the company stocks and in a meeting with the board reached an agreement. The CEO would resign in one month, pay back the profit made on the trades and the board would accept the resignation and there would be no disclosure of what happened. The CEO asked the auditor not to disclose what had happened as there was no financial harm to the company.
Do you believe that this situation would have to be disclosed by the auditor?© BrainMass Inc. brainmass.com June 21, 2018, 7:54 pm ad1c9bdddf
There are several issues in this problem, and each of the following would have to be judged as it relates to the others. That is to say that financial statement disclosure may arise from any or all the issues. Then the extent of the disclosure will also have to be determined.
The financial statements are the company's statements, not the auditors' statements. The position of the Board has already been stated: no disclosure. If the position is not changed, the auditor may have to consider a qualified or adverse opinion, a disclaimer of opinion, or a withdrawal from the engagement.
1. Assuming this is an SEC regulated company (meaning that it trades on a public stock exchange), the insider trading may be legal or illegal. It is legal for corporate insiders to trade stock in their own company provided the trades are reported to the SEC, and disclosed in published documents available to the investing public. It is illegal for insiders to trade with ...
The 645 word solution discusses the CEO insider stock trading in detail including possible choices and repercussions that could result. The choices for the auditor are also given.