Question

During the annual audit of Ajax Corp., a publicly held company, Jones, CPA, a continuing auditor, deter-mined that illegal political contributions had been made during each of the past seven years, including the year under audit. Jones notified the board of directors about the illegal contributions, but they refused to take any action because the amounts involved were immaterial to the financial statements. Since management took no action, Jones should

Report the illegal contributions to the Securities and Exchange Commission

Issue an "except for" qualified opinion or an adverse opinion

Disregard the political contributions since the board of directors was notified and the amounts involved were immaterial

Consider withdrawing from the engagement or dissociating from any future relationship with Ajax Corp.

Answer 1

As the Management of Ajax corp has made illegal contributions & they have refused to take any actions to the financial statements. So,

Jones should issue an "except for" qualified opinion or an adverse opinion

An auditor should report to SEC only material illegal items & can't simple disregard the illegal political contributions & cannot withdraw only for such a small thing.

So, Option B. Issue an "except for" qualified opinion or an adverse opinion is the answer.