Aglagadan, Gian Kaye V.

III - BSA

1. External auditor Jose obtained an evidence of fraud in the company that he is

currently auditing. Discuss what he should do given this situation.
- he should always consider the implications for other aspects of the audit. If
the resulting misstatement is not material to the financial statements, he
should refer the matter to an appropriate level of management at least one
level above those involved. For fraud that has a material effect on the
financial statements, the auditor should discuss the matter and any further
investigation with an appropriate level of management, determine its effect on
the financial statements and the auditor’s report, report it directly to the audit
committee and suggest the client consult legal counsel.
2. Discuss why the nature, timing, and extent of audit procedures vary.
- The auditor considers many factors in determining the nature, timing, and
extent of auditing procedures to be performed in an audit of an entity's
financial statements. One of the factors is the existence of an internal audit
function. This section provides the auditor with guidance on considering the
work of internal auditors and on using internal auditors to provide direct
assistance to the auditor in an audit performed in accordance with generally
accepted auditing standards. When performing an integrated audit of financial
statements and internal control over financial reporting, refer to paragraphs
16-19 of PCAOB Auditing Standard No. 5, An Audit of Internal Control Over
Financial Reporting That Is Integrated with An Audit of Financial Statements,
for discussion on using the work of others to alter the nature, timing, and
extent of the work that otherwise would have been performed to test controls.