An auditor discovers a material defalcation involving the theft of $500,000 of inventory. Restitution will not be made. Which of the following statements is not correct regarding the auditor’s responsibility for reporting the defalcation?

a. Because theft was involved, the auditor must report it to the client's legal coun- sel with a follow-up to see that it had been reported to the proper legal en- forcement group. 

b. The theft, because it is material, should be separately reported as a line item in the financial statements because it is unusual, nonrecurring, and there will be no restitution. 

c. The theft must be reported to the audit committee. 

d. The theft must be reported to top management.