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An Engagement to Audit the Financial Statements of General Company

Post, CPA, accepted an engagement to audit the financial statements of General Company, a new client. General is a publicly held retailing entity that recently replace its operating management. In the course of applying auditing procedures, Post discovered that General's financial statements may be materially misstated due to the existence of fraud.

a) Describe Post's responsibilities regarding the circumstance described.

b) Describe Post's responsibilities to report (including what type of opinion) on General's financial statements and other communications if Post is precluded from applying necessary procedures in searching for fraud.

c) Describe Post's responsibilities to report(including what type of opinion) on General financial statements and other communications if Post concludes that General's financial statements are materially affected by fraud.

d) Describe the circumstances in which Post may have a duty to disclose fraud to third parties outside General's management and its audit committee.

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1. If Post discovers that General's financial statements may be materially misstated due to the existence of fraud, Post should consider the implications for other aspects of the audit. Post should then discuss the matter and approach to further investigation with an appropriate level of management that is at least one level above those involved with the fraud. Post should also attempt to obtain sufficient competent ...

Solution Summary

Post, CPA, accepted an engagement to audit the financial statements of General Company, a new client. General is a publicly held retailing entity that recently replace its operating management. In the course of applying auditing procedures, Post discovered that General's financial statements may be materially misstated due to the existence of fraud.

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