Opinion on the Occurrence of Illegal Acts. Ostling, Auktoriserad Revisor, accepted an engagement to audit the financial statements of Sandnes Company of Göteborg, Sweden.

Ostling’s discussions with Sandnes’s new management and the predecessor auditor indicated the possibility that Sandnes’s financial statements may be misstated due to the possible occurrence of errors, irregularities, and illegal acts.

Required:

A. Identify and describe Ostling’s responsibilities to detect Sandnes’s errors and irregularities.

Do not identify specific audit procedures.

B. Identify and describe Ostling’s responsibilities to report Sandnes’s errors and irregularities.

C. Describe Ostling’s responsibilities to detect Sandnes’s material illegal acts. Do not identify specific audit procedures.

[Adapted and reprinted with permission from AICPA. Copyright © 2000 & 1985 by American Institute of Certified Accountants]