a. Identify and describe
Reed, CPA, accepted an engagement to audit the financial statements of Smith Company. Reed’s discussions with Smith’s new management and the predecessor auditor indicated the possibility that Smith’s financial statements may be misstated due to the possible occurrence of errors, fraud, and illegal acts.
a. Identify and describe Reed’s responsibilities to detect Smith’s errors and fraud. Do not identify specific
b. Describe Reed’s responsibilities to detect Smith’s material noncompliance with laws. Do not identify specific audit procedures.
c, Identify and describe Reed’s responsibilities to report Smith’s noncompliance with laws.
Auditors must consider the possibility of fraud by employees or management on every audit engagement. They must also consider the possibility that the client has not complied with laws.
(a) Distinguish between employee and management fraud.
(b) Describe the auditors' responsibility for the detection of fraud in an audit.
(c) Describe the auditors' responsibility regarding noncompliance with laws by a client.
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