McGee is auditing Nevus Corporation and detects probable criminal activity by one of the employees. McGee believes this will have a material impact on the financial statements. The financial statements of Nevus Corporation are under the Securities Exchange Act of 1934. Which of the following is correct?

  1. McGee should report this to the Securities Exchange Commission.
  2. McGee should report this to the Justice Department.
  3. McGee should report this to Nevus Corporation’s audit committee or board of directors.
  4. McGee will discharge his duty by requiring that a note of this be included in the financial statements.