Below is a conversation between the two junior auditors assigned to the Hillsburg audit, Mitch and AJ.
MB: Hey, pssst . . . .
AJ: What going on Mitch?
MB: Come here, closer.
AJ: Mitch, why are you whispering?
MB: Don’t say anything, but I just overheard Joe and Leslie talking about some fraud at Hillsburg.
AJ: Fraud!? No way!
MB: Be quiet. That’s right fraud. Someone actually called the whistle blower hotline and reported some accounting fraud.

AJ: You heard Joe and Leslie talking about it?
MB: Yes. Due the never-ending office renovations, my cubicle was temporary relocated right beside Joe’s office. His office walls are paper-thin so I hear almost everything that goes on inside.
AJ: No way.
MB: Yeah, I even know what Joe and his wife argue about over the phone. Lately his wife isn’t happy that Joe has to work so late.
AJ: What about the fraud?
MB: I am trying to find out more information. I already texted a couple juniors who worked on the Hillsburg audit last year. Hopefully I hear back from them soon and they can tell me more.
AJ: Didn’t one of the juniors quit BKK and now works somewhere else?
MB: Yeah, but we have a WhatsApp chat group and keep in
touch.
AJ: Hey! Why am I not part of this WhatsApp group?
MB: Ha-ha, I guess you are not yet popular enough. Anyhow, if this fraud turns out to be for real, this will change the whole audit.
AJ: How?

REQUIRED
a. In the discussion between Mitch and AJ, identify the relevant ethical requirements of auditors that were breached. Explain.
b. List the procedures that the auditor should perform to obtain information that will enable the auditor to assess fraud risk.
c. Discuss management’s and auditor’s responsibilities for the prevention and detection of fraud.
d. Discuss the impact of the reported fraud on Hillsburg’s financial statement audit.