Orchard Enterprises Limited (OEL) is a medium-sized Miami-based distributor of leisureware fashion garments. It has a mainframe computer in its Miami headquarters to process its major application systems. In addition, it has a large number of microcomputers to provide personal support for its staff. These microcomputers are connected to various local area networks which are in turn connected to the mainframe.

You are the partner in charge of the external audit of OEL. One day, as you are working with one of your audit managers to plan OEL's year-end audit work, you receive a telephone call from OEL's managing director. He is extremely distressed. One of his executives had been using her personal computer. As she commenced her work, she found many of her critical files had been deleted. When she tried to recover her files from backup copies, she found the backup had been corrupted. The situation was investigated by one of OEL's programmers, and he believes that a virus has been introduced into the system. Although he has no proof, he suspects the virus has been planted by a programmer who was fired six months earlier after repeated counseling about his poor performance. It appears the programmer introduced the virus shortly before he was fired. The virus has remained relatively dormant, however, until it was triggered by the date on which the executive used her machine. Over the six-month period, however, it has been progressively corrupting backup files. The damage done to backup has increased as time has passed.

The managing director indicates that he has ordered all computers to be shut down pending further investigations. He asks your advice on how he should now proceed. He also asks whether the discovery of the virus will mean the costs of the year-end audit work will increase significantly and what implications it will have for the audit opinion you issue.

Required. Write some brief notes in preparation for an urgent meeting with the managing director where you will attempt to answer his questions.