Arizona Laws 44-2123. Audit discoveries; required responses
A. In the course of conducting an audit to which this article applies, if the independent certified public accountant detects or becomes aware of information indicating that an illegal act, whether or not perceived to have a material effect on the issuer‘s financial statements, has or may have occurred, the independent certified public accountant, in accordance with generally accepted auditing standards, as modified or supplemented by the commission, shall:
Terms Used In Arizona Laws 44-2123
- Action: includes any matter or proceeding in a court, civil or criminal. See Arizona Laws 1-215
- Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
- illegal act: means an act or omission that violates any law or any rule having the force of law. See Arizona Laws 44-2121
- including: means not limited to and is not a term of exclusion. See Arizona Laws 1-215
- Issuer: means any person who issues or proposes to issue any security, except:
(a) With respect to certificates of deposit, voting-trust certificates, collateral-trust certificates, certificates of interest or shares in an unincorporated investment trust, whether or not of the fixed, restricted management or unit type, issuer means the person or persons performing the acts and assuming the duties of depositor or manager pursuant to the provisions of the trust or other agreement or instrument under which such securities are issued. See Arizona Laws 44-1801
1. Determine whether it is likely that an illegal act has occurred and, if so, shall determine and consider the possible effect of the illegal act on the financial statements of the issuer, including any contingent monetary effects such as fines, penalties and damages.
2. As soon as practicable, inform the appropriate level of the issuer’s management and ensure that the issuer’s audit committee or board of directors in the absence of an audit committee is adequately informed about any illegal acts that have been detected or have otherwise come to the attention of the certified public accountant in the course of the audit, unless the illegal act is clearly inconsequential.
B. After determining that the audit committee or board of directors is adequately informed pursuant to subsection A, as soon as practicable, the independent certified public accountant shall report the accountant’s conclusions to the board of directors if the independent certified public accountant concludes that all of the following have occurred:
1. The illegal act has a material effect on the financial statements of the issuer.
2. The senior management has not taken, and the board of directors has not caused senior management to take, timely and appropriate remedial actions with respect to the illegal act.
3. The failure to take remedial action is reasonably expected to warrant departure from a standard report of the auditor, when made, or warrant resignation from the audit engagement.
C. Unless exempted by the commission by rule or order, an issuer whose board of directors receives a report pursuant to subsection B shall inform the commission by written notice within one business day after receiving the report and shall furnish the independent certified public accountant making the report with a copy of the written notice. If the independent certified public accountant fails to receive a copy of the notice within the required period, the independent certified public accountant, within one business day after the failure to receive a copy of the notice, shall resign from the engagement, give the commission a copy of the accountant’s report or give the commission the documentation of any oral report.
D. If an independent certified public accountant resigns from an engagement pursuant to subsection C, the independent certified public accountant, within one business day after the failure to receive a copy of the notice, shall give the commission a copy of the accountant’s report or the documentation of any oral report.