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Audit standards distinguish auditors responsibility for planning procedures for detecting noncompliance with laws and regulations...

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Accounting

Audit standards distinguish auditors responsibility for planning procedures for detecting noncompliance with laws and regulations having a direct effect on financial statements versus planning procedures for detecting noncompliance with laws and regulations that do not have a direct effect on financial statements. Required: b. For each of the following instances of noncompliance, explain why they are either direct-effect (D) or indirect-effect (I) noncompliance:

1.A manufacturer inflates expenses on its corporate tax return.

2.A retailer pays men more than women for performing the same job.

3.A coal mining company fails to place proper ventilation in its mines.

4.A military contractor inflates the overhead applied to a combat vehicle.

5.An insurance company fails to maintain required reserves for losses.

6.An exporter pays a bribe to a foreign government official so that government will buy its products.

7.A company backdates its executive stock options to lower the exercise price.

8.A company fails to fund its pension plan in accordance with ERISA.

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