Which of the following is a potential action that a supervisory body could take as a result of audit negligence?

• A. Damages.
• B. Bad publicity.
• C. Disciplinary action by supervisory body.
• D. May not remain a going concern.

Answer: (C)

Supervisory bodies regulate the auditing profession and have the authority to sanction auditors for negligence in order to protect the public interest and uphold professional standards. When negligence is found, disciplinary action is the direct, formal response these bodies can take against the auditor or firm, ranging from admonitions or fines to suspension or removal from practice. This shows the regulator actively enforcing ethics and quality in audits.

Damages are usually pursued in civil courts by clients or stakeholders rather than being sanctions imposed by the regulator. Bad publicity is a consequence of negligent work but not a formal action the supervisory body would implement. The going concern status relates to the financial health of the entity being audited, not a disciplinary measure by the regulator. So, disciplinary action by the supervisory body best fits as the potential action stemming from audit negligence.