Audit Risk. Your firm recently signed a letter of engagement to audit CitCo, the local city and county government. Over your morning cup of coffee, you open the local newspaper and read the following: Police are investigating how two computer servers belonging to CitCo ended up next to the commercial trash compactor of a local restaurant. The servers’ property tags helped police trace them to the CitCo tax collector’s office. Bob Bogus, director of the tax collector’s office, said that his office had recently relinquished the servers to the property management office because the tax collector’s office had purchased new servers. Ima Teller, spokesperson for the property management office, was unable to confirm whether her office had received the computer servers. It is unknown what data, such as citizen tax records and social security numbers, were on the servers at the time they were found, or whether another CitCo office was using the servers at the time of the theft. A spokesperson for the Chief Financial Officer indicated that office policy is to erase confidential data from the drives before relinquishing or disposing of servers. The investigation is ongoing.
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Discuss how the above information would affect the assessment and work your office does on the audit for CitCo. Include in your discussion any special considerations that may result if the audit is conducted under GAGAS.