Which of the following information that comes to an auditor's attention most likely would raise a question about the occurrence of noncompliance with laws and regulations?
A. The failure to develop adequate procedures that detect unauthorized purchases.
B. The exchange of property for similar property in a nonmonetary transaction.
C. The presence of several difficult-to-audit transactions affecting expense accounts.
D. The discovery of unexplained payments made to government employees.
Answer:D
Choice "D" is correct. The discovery of unexplained payments made to government employees would raise a question about the occurrence of an act of noncompliance with laws and regulations.
Choice "B" is incorrect. Exchange of property for similar property in a nonmonetary transaction might be indicative of a related party transaction, not noncompliance with laws and regulations.
Choice "C" is incorrect. The presence of several difficult-to-audit transactions affecting expense accounts is not indicative of noncompliance with laws and regulations.
Choice "A" is incorrect. The failure to develop adequate procedures that detect unauthorized purchases is an internal control weakness, not an act of noncompliance with laws and regulations.